Correlation Between BF Utilities and Taj GVK

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

Diversification Opportunities for BF Utilities and Taj GVK

0.13

Correlation Coefficient

BF Utilities  Taj GVK

Average diversification

The 3 months correlation between BFUTILITIE and Taj is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Taj GVK Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taj GVK Hotels 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 Taj GVK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taj GVK Hotels has no effect on the direction of BF Utilities i.e., BF Utilities and Taj GVK go up and down completely randomly.

Pair Corralation between BF Utilities and Taj GVK

Assuming the 90 days trading horizon BF Utilities Limited is expected to under-perform the Taj GVK. But the stock apears to be less risky and, when comparing its historical volatility, BF Utilities Limited is 1.31 times less risky than Taj GVK. The stock trades about -0.04 of its potential returns per unit of risk. The Taj GVK Hotels is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  28,690  in Taj GVK Hotels on October 22, 2024 and sell it today you would earn a total of  11,290  from holding Taj GVK Hotels or generate 39.35% return on investment over 90 days.

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

BF Utilities Limited  vs.  Taj GVK Hotels

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 uncertain 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.

Taj GVK Hotels

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BF Utilities and Taj GVK

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

The idea behind BF Utilities Limited and Taj GVK Hotels 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.