Correlation Between Motisons Jewellers and BF Investment

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

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

Diversification Opportunities for Motisons Jewellers and BF Investment

-0.29

Correlation Coefficient

Motisons Jewellers  BF Investment

Very good diversification

The 3 months correlation between Motisons and BFINVEST is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Motisons Jewellers 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 Motisons Jewellers 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 Motisons Jewellers 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 Motisons Jewellers i.e., Motisons Jewellers and BF Investment go up and down completely randomly.

Pair Corralation between Motisons Jewellers and BF Investment

Assuming the 90 days trading horizon Motisons Jewellers is expected to generate 1.06 times more return on investment than BF Investment. However, Motisons Jewellers is 1.06 times more volatile than BF Investment Limited. It trades about -0.04 of its potential returns per unit of risk. BF Investment Limited is currently generating about -0.21 per unit of risk. If you would invest  2,810  in Motisons Jewellers on September 22, 2024 and sell it today you would lose (54.00) from holding Motisons Jewellers or give up 1.92% of portfolio value over 90 days.

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

Motisons Jewellers  vs.  BF Investment Limited

Motisons Jewellers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Motisons Jewellers 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BF Investment Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, BF Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Motisons Jewellers and BF Investment

The main advantage of trading using opposite Motisons Jewellers and BF Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motisons Jewellers 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 Motisons Jewellers 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.