Correlation Between BF Utilities and Reliance Home

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

Diversification Opportunities for BF Utilities and Reliance Home

0.22

Correlation Coefficient

BF Utilities  Reliance Home

Modest diversification

The 3 months correlation between BFUTILITIE and Reliance is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Reliance Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Home Finance 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 Reliance Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Home Finance has no effect on the direction of BF Utilities i.e., BF Utilities and Reliance Home go up and down completely randomly.

Pair Corralation between BF Utilities and Reliance Home

Assuming the 90 days trading horizon BF Utilities Limited is expected to generate 1.11 times more return on investment than Reliance Home. However, BF Utilities is 1.11 times more volatile than Reliance Home Finance. It trades about 0.09 of its potential returns per unit of risk. Reliance Home Finance is currently generating about 0.03 per unit of risk. If you would invest  37,510  in BF Utilities Limited on October 4, 2024 and sell it today you would earn a total of  60,240  from holding BF Utilities Limited or generate 160.6% 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.  Reliance Home Finance

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Reliance Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BF Utilities and Reliance Home

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

The idea behind BF Utilities Limited and Reliance Home Finance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.