Correlation Between BF Investment and Welspun Corp

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

Diversification Opportunities for BF Investment and Welspun Corp

-0.07

Correlation Coefficient

BF Investment  Welspun Corp

Good diversification

The 3 months correlation between BFINVEST and Welspun is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Welspun Corp Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welspun Corp Limited 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 Welspun Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welspun Corp Limited has no effect on the direction of BF Investment i.e., BF Investment and Welspun Corp go up and down completely randomly.

Pair Corralation between BF Investment and Welspun Corp

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the Welspun Corp. In addition to that, BF Investment is 1.21 times more volatile than Welspun Corp Limited. It trades about -0.08 of its total potential returns per unit of risk. Welspun Corp Limited is currently generating about 0.08 per unit of volatility. If you would invest  71,880  in Welspun Corp Limited on October 26, 2024 and sell it today you would earn a total of  7,025  from holding Welspun Corp Limited or generate 9.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BF Investment Limited  vs.  Welspun Corp Limited

BF Investment Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BF Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Welspun Corp Limited

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Welspun Corp Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Welspun Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BF Investment and Welspun Corp

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

The idea behind BF Investment Limited and Welspun Corp 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.