Correlation Between BF Utilities and Le Travenues

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

Diversification Opportunities for BF Utilities and Le Travenues

0.49

Correlation Coefficient

BF Utilities  Le Travenues

Very weak diversification

The 3 months correlation between BFUTILITIE and IXIGO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Le Travenues Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Le Travenues Technology 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 Le Travenues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Le Travenues Technology has no effect on the direction of BF Utilities i.e., BF Utilities and Le Travenues go up and down completely randomly.

Pair Corralation between BF Utilities and Le Travenues

Assuming the 90 days trading horizon BF Utilities Limited is expected to under-perform the Le Travenues. But the stock apears to be less risky and, when comparing its historical volatility, BF Utilities Limited is 1.18 times less risky than Le Travenues. The stock trades about -0.27 of its potential returns per unit of risk. The Le Travenues Technology is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  16,876  in Le Travenues Technology on October 26, 2024 and sell it today you would lose (2,794) from holding Le Travenues Technology or give up 16.56% of portfolio value over 90 days.

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

BF Utilities Limited  vs.  Le Travenues Technology

BF Utilities Limited

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BF Utilities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BF Utilities is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Le Travenues Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Le Travenues Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Le Travenues is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BF Utilities and Le Travenues

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

The idea behind BF Utilities Limited and Le Travenues Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.