Correlation Between BF Utilities and Kotak Mahindra

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

Diversification Opportunities for BF Utilities and Kotak Mahindra

-0.71

Correlation Coefficient

BF Utilities  Kotak Mahindra

Pay attention - limited upside

The 3 months correlation between BFUTILITIE and Kotak is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Kotak Mahindra Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kotak Mahindra Bank 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 Kotak Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kotak Mahindra Bank has no effect on the direction of BF Utilities i.e., BF Utilities and Kotak Mahindra go up and down completely randomly.

Pair Corralation between BF Utilities and Kotak Mahindra

Assuming the 90 days trading horizon BF Utilities Limited is expected to under-perform the Kotak Mahindra. In addition to that, BF Utilities is 2.42 times more volatile than Kotak Mahindra Bank. It trades about -0.07 of its total potential returns per unit of risk. Kotak Mahindra Bank is currently generating about 0.2 per unit of volatility. If you would invest  174,120  in Kotak Mahindra Bank on December 29, 2024 and sell it today you would earn a total of  43,000  from holding Kotak Mahindra Bank or generate 24.7% return on investment over 90 days.

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

BF Utilities Limited  vs.  Kotak Mahindra Bank

BF Utilities Limited

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Kotak Mahindra Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kotak Mahindra Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Kotak Mahindra sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BF Utilities and Kotak Mahindra

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

The idea behind BF Utilities Limited and Kotak Mahindra Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.