Correlation Between BF Investment and Varun Beverages

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

Diversification Opportunities for BF Investment and Varun Beverages

0.35

Correlation Coefficient

BF Investment  Varun Beverages

Weak diversification

The 3 months correlation between BFINVEST and Varun is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages 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 Varun Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varun Beverages has no effect on the direction of BF Investment i.e., BF Investment and Varun Beverages go up and down completely randomly.

Pair Corralation between BF Investment and Varun Beverages

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the Varun Beverages. In addition to that, BF Investment is 1.51 times more volatile than Varun Beverages Limited. It trades about -0.09 of its total potential returns per unit of risk. Varun Beverages Limited is currently generating about 0.07 per unit of volatility. If you would invest  61,300  in Varun Beverages Limited on September 28, 2024 and sell it today you would earn a total of  1,110  from holding Varun Beverages Limited or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BF Investment Limited  vs.  Varun Beverages Limited

BF Investment Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 5 (%) 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.

Varun Beverages

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BF Investment and Varun Beverages

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

The idea behind BF Investment Limited and Varun Beverages Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.