Correlation Between BF Utilities and Pilani Investment

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

Diversification Opportunities for BF Utilities and Pilani Investment

0.9

Correlation Coefficient

BF Utilities  Pilani Investment

Almost no diversification

The 3 months correlation between BFUTILITIE and Pilani is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Pilani Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilani Investment 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 Pilani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilani Investment has no effect on the direction of BF Utilities i.e., BF Utilities and Pilani Investment go up and down completely randomly.

Pair Corralation between BF Utilities and Pilani Investment

Assuming the 90 days trading horizon BF Utilities Limited is expected to generate 1.65 times more return on investment than Pilani Investment. However, BF Utilities is 1.65 times more volatile than Pilani Investment and. It trades about -0.21 of its potential returns per unit of risk. Pilani Investment and is currently generating about -0.38 per unit of risk. If you would invest  97,670  in BF Utilities Limited on December 1, 2024 and sell it today you would lose (36,475) from holding BF Utilities Limited or give up 37.35% of portfolio value over 90 days.

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

BF Utilities Limited  vs.  Pilani Investment and

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 unfluctuating 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.

Pilani Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pilani Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with BF Utilities and Pilani Investment

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

The idea behind BF Utilities Limited and Pilani Investment and 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.