Correlation Between Life Insurance and BF Utilities

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

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

Diversification Opportunities for Life Insurance and BF Utilities

0.19

Correlation Coefficient

Life Insurance  BF Utilities

Average diversification

The 3 months correlation between Life and BFUTILITIE is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and BF Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BF Utilities Limited and Life Insurance 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 Life Insurance are associated (or correlated) with BF Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BF Utilities Limited has no effect on the direction of Life Insurance i.e., Life Insurance and BF Utilities go up and down completely randomly.

Pair Corralation between Life Insurance and BF Utilities

Assuming the 90 days trading horizon Life Insurance is expected to generate 2.55 times less return on investment than BF Utilities. But when comparing it to its historical volatility, Life Insurance is 1.69 times less risky than BF Utilities. It trades about 0.05 of its potential returns per unit of risk. BF Utilities Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  35,720  in BF Utilities Limited on October 25, 2024 and sell it today you would earn a total of  48,885  from holding BF Utilities Limited or generate 136.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Life Insurance  vs.  BF Utilities Limited

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with Life Insurance and BF Utilities

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

The idea behind Life Insurance and BF Utilities 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.