Correlation Between BF Investment and Tata Investment

Can any of the company-specific risk be diversified away by investing in both BF Investment and Tata Investment 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 Tata Investment 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 Tata Investment, you can compare the effects of market volatilities on BF Investment and Tata Investment 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 Tata Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Investment and Tata Investment.

Diversification Opportunities for BF Investment and Tata Investment

0.14

Correlation Coefficient

BF Investment  Tata Investment

Average diversification

The 3 months correlation between BFINVEST and Tata is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment 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 Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of BF Investment i.e., BF Investment and Tata Investment go up and down completely randomly.

Pair Corralation between BF Investment and Tata Investment

Assuming the 90 days trading horizon BF Investment is expected to generate 1.48 times less return on investment than Tata Investment. In addition to that, BF Investment is 1.12 times more volatile than Tata Investment. It trades about 0.06 of its total potential returns per unit of risk. Tata Investment is currently generating about 0.1 per unit of volatility. If you would invest  222,927  in Tata Investment on October 4, 2024 and sell it today you would earn a total of  461,993  from holding Tata Investment or generate 207.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

BF Investment Limited  vs.  Tata Investment

BF Investment Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, BF Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tata Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Tata Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BF Investment and Tata Investment

The main advantage of trading using opposite BF Investment and Tata Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BF Investment position performs unexpectedly, Tata Investment 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 Tata Investment will offset losses from the drop in Tata Investment's long position.

The idea behind BF Investment Limited and Tata Investment 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.