Correlation Between Kewal Kiran and BF Investment

Can any of the company-specific risk be diversified away by investing in both Kewal Kiran and BF 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 Kewal Kiran and BF Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kewal Kiran Clothing and BF Investment Limited, you can compare the effects of market volatilities on Kewal Kiran and BF 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 Kewal Kiran with a short position of BF Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kewal Kiran and BF Investment.

Diversification Opportunities for Kewal Kiran and BF Investment

-0.68

Correlation Coefficient

Kewal Kiran  BF Investment

Excellent diversification

The 3 months correlation between Kewal and BFINVEST is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kewal Kiran Clothing and BF Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BF Investment Limited and Kewal Kiran 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 Kewal Kiran Clothing are associated (or correlated) with BF Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BF Investment Limited has no effect on the direction of Kewal Kiran i.e., Kewal Kiran and BF Investment go up and down completely randomly.

Pair Corralation between Kewal Kiran and BF Investment

Assuming the 90 days trading horizon Kewal Kiran Clothing is expected to under-perform the BF Investment. But the stock apears to be less risky and, when comparing its historical volatility, Kewal Kiran Clothing is 1.68 times less risky than BF Investment. The stock trades about -0.04 of its potential returns per unit of risk. The BF Investment Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  46,125  in BF Investment Limited on September 19, 2024 and sell it today you would earn a total of  27,065  from holding BF Investment Limited or generate 58.68% return on investment over 90 days.

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

Kewal Kiran Clothing  vs.  BF Investment Limited

Kewal Kiran Clothing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kewal Kiran Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kewal Kiran is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BF Investment Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, BF Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kewal Kiran and BF Investment

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

The idea behind Kewal Kiran Clothing and BF Investment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.