Correlation Between BF Utilities and Steelcast

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

Diversification Opportunities for BF Utilities and Steelcast

0.05

Correlation Coefficient

BF Utilities  Steelcast

Significant diversification

The 3 months correlation between BFUTILITIE and Steelcast is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Steelcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelcast Limited 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 Steelcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelcast Limited has no effect on the direction of BF Utilities i.e., BF Utilities and Steelcast go up and down completely randomly.

Pair Corralation between BF Utilities and Steelcast

Assuming the 90 days trading horizon BF Utilities Limited is expected to under-perform the Steelcast. In addition to that, BF Utilities is 1.33 times more volatile than Steelcast Limited. It trades about -0.26 of its total potential returns per unit of risk. Steelcast Limited is currently generating about -0.02 per unit of volatility. If you would invest  86,430  in Steelcast Limited on October 21, 2024 and sell it today you would lose (1,355) from holding Steelcast Limited or give up 1.57% of portfolio value over 90 days.

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

BF Utilities Limited  vs.  Steelcast 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 latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Steelcast Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Steelcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BF Utilities and Steelcast

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

The idea behind BF Utilities Limited and Steelcast 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.