Correlation Between BF Utilities and Bigbloc Construction

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

Diversification Opportunities for BF Utilities and Bigbloc Construction

-0.05

Correlation Coefficient

BF Utilities  Bigbloc Construction

Good diversification

The 3 months correlation between BFUTILITIE and Bigbloc is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Bigbloc Construction Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bigbloc Construction 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 Bigbloc Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bigbloc Construction has no effect on the direction of BF Utilities i.e., BF Utilities and Bigbloc Construction go up and down completely randomly.

Pair Corralation between BF Utilities and Bigbloc Construction

Assuming the 90 days trading horizon BF Utilities is expected to generate 1.69 times less return on investment than Bigbloc Construction. But when comparing it to its historical volatility, BF Utilities Limited is 2.18 times less risky than Bigbloc Construction. It trades about 0.06 of its potential returns per unit of risk. Bigbloc Construction Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,751  in Bigbloc Construction Limited on October 5, 2024 and sell it today you would earn a total of  2,674  from holding Bigbloc Construction Limited or generate 34.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.24%
Values	Daily Returns

BF Utilities Limited  vs.  Bigbloc Construction Limited

BF Utilities Limited

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BF Utilities Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, BF Utilities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bigbloc Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bigbloc Construction Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Bigbloc Construction 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 Utilities and Bigbloc Construction

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

The idea behind BF Utilities Limited and Bigbloc Construction 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.