Correlation Between BF Utilities and Aban Offshore

Can any of the company-specific risk be diversified away by investing in both BF Utilities and Aban Offshore 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 Utilities and Aban Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BF Utilities Limited and Aban Offshore Limited, you can compare the effects of market volatilities on BF Utilities and Aban Offshore 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 Utilities with a short position of Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Utilities and Aban Offshore.

Diversification Opportunities for BF Utilities and Aban Offshore

-0.47

Correlation Coefficient

BF Utilities  Aban Offshore

Very good diversification

The 3 months correlation between BFUTILITIE and Aban is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and BF Utilities 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 Utilities Limited are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of BF Utilities i.e., BF Utilities and Aban Offshore go up and down completely randomly.

Pair Corralation between BF Utilities and Aban Offshore

Assuming the 90 days trading horizon BF Utilities Limited is expected to generate 1.74 times more return on investment than Aban Offshore. However, BF Utilities is 1.74 times more volatile than Aban Offshore Limited. It trades about 0.11 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.13 per unit of risk. If you would invest  78,505  in BF Utilities Limited on September 1, 2024 and sell it today you would earn a total of  20,110  from holding BF Utilities Limited or generate 25.62% return on investment over 90 days.

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

BF Utilities Limited  vs.  Aban Offshore Limited

BF Utilities Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Utilities Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, BF Utilities demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Aban Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BF Utilities and Aban Offshore

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

The idea behind BF Utilities Limited and Aban Offshore 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.