Correlation Between BF Utilities and Shradha Infraprojects

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

Diversification Opportunities for BF Utilities and Shradha Infraprojects

-0.04

Correlation Coefficient

BF Utilities  Shradha Infraprojects

Good diversification

The 3 months correlation between BFUTILITIE and Shradha is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Shradha Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shradha Infraprojects 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 Shradha Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shradha Infraprojects has no effect on the direction of BF Utilities i.e., BF Utilities and Shradha Infraprojects go up and down completely randomly.

Pair Corralation between BF Utilities and Shradha Infraprojects

Assuming the 90 days trading horizon BF Utilities is expected to generate 11.15 times less return on investment than Shradha Infraprojects. But when comparing it to its historical volatility, BF Utilities Limited is 14.18 times less risky than Shradha Infraprojects. It trades about 0.07 of its potential returns per unit of risk. Shradha Infraprojects Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,577  in Shradha Infraprojects Limited on October 4, 2024 and sell it today you would earn a total of  8,227  from holding Shradha Infraprojects Limited or generate 521.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

BF Utilities Limited  vs.  Shradha Infraprojects Limited

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.

Shradha Infraprojects

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shradha Infraprojects Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Shradha Infraprojects sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BF Utilities and Shradha Infraprojects

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

The idea behind BF Utilities Limited and Shradha Infraprojects Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.