Correlation Between BF Investment and Silly Monks

Can any of the company-specific risk be diversified away by investing in both BF Investment and Silly Monks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BF Investment and Silly Monks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BF Investment Limited and Silly Monks Entertainment, you can compare the effects of market volatilities on BF Investment and Silly Monks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BF Investment with a short position of Silly Monks. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Investment and Silly Monks.

Diversification Opportunities for BF Investment and Silly Monks

-0.34

Correlation Coefficient

BF Investment  Silly Monks

Very good diversification

The 3 months correlation between BFINVEST and Silly is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Silly Monks Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silly Monks Entertainment and BF Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BF Investment Limited are associated (or correlated) with Silly Monks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silly Monks Entertainment has no effect on the direction of BF Investment i.e., BF Investment and Silly Monks go up and down completely randomly.

Pair Corralation between BF Investment and Silly Monks

Assuming the 90 days trading horizon BF Investment Limited is expected to generate 0.89 times more return on investment than Silly Monks. However, BF Investment Limited is 1.12 times less risky than Silly Monks. It trades about 0.04 of its potential returns per unit of risk. Silly Monks Entertainment is currently generating about 0.02 per unit of risk. If you would invest  49,390  in BF Investment Limited on October 5, 2024 and sell it today you would earn a total of  19,170  from holding BF Investment Limited or generate 38.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.57%
Values	Daily Returns

BF Investment Limited  vs.  Silly Monks Entertainment

BF Investment Limited

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, BF Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Silly Monks Entertainment

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silly Monks Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Silly Monks displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BF Investment and Silly Monks

The main advantage of trading using opposite BF Investment and Silly Monks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BF Investment position performs unexpectedly, Silly Monks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Silly Monks will offset losses from the drop in Silly Monks' long position.

The idea behind BF Investment Limited and Silly Monks Entertainment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.