Correlation Between BF Utilities and HDFC Asset

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

Diversification Opportunities for BF Utilities and HDFC Asset

0.33

Correlation Coefficient

BF Utilities  HDFC Asset

Weak diversification

The 3 months correlation between BFUTILITIE and HDFC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and HDFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Asset Management 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 HDFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Asset Management has no effect on the direction of BF Utilities i.e., BF Utilities and HDFC Asset go up and down completely randomly.

Pair Corralation between BF Utilities and HDFC Asset

Assuming the 90 days trading horizon BF Utilities Limited is expected to generate 1.73 times more return on investment than HDFC Asset. However, BF Utilities is 1.73 times more volatile than HDFC Asset Management. It trades about 0.07 of its potential returns per unit of risk. HDFC Asset Management is currently generating about 0.1 per unit of risk. If you would invest  36,120  in BF Utilities Limited on October 23, 2024 and sell it today you would earn a total of  52,780  from holding BF Utilities Limited or generate 146.12% return on investment over 90 days.

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

BF Utilities Limited  vs.  HDFC Asset Management

BF Utilities Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BF Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BF Utilities is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

HDFC Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BF Utilities and HDFC Asset

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

The idea behind BF Utilities Limited and HDFC Asset Management 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.