Correlation Between SIL Investments and BF Investment

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

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

Diversification Opportunities for SIL Investments and BF Investment

0.91

Correlation Coefficient

SIL Investments  BF Investment

Almost no diversification

The 3 months correlation between SIL and BFINVEST is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited 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 SIL Investments 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 SIL Investments Limited 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 SIL Investments i.e., SIL Investments and BF Investment go up and down completely randomly.

Pair Corralation between SIL Investments and BF Investment

Assuming the 90 days trading horizon SIL Investments Limited is expected to generate 1.42 times more return on investment than BF Investment. However, SIL Investments is 1.42 times more volatile than BF Investment Limited. It trades about 0.09 of its potential returns per unit of risk. BF Investment Limited is currently generating about 0.13 per unit of risk. If you would invest  56,340  in SIL Investments Limited on September 20, 2024 and sell it today you would earn a total of  12,145  from holding SIL Investments Limited or generate 21.56% return on investment over 90 days.

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

SIL Investments Limited  vs.  BF Investment Limited

SIL Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

BF Investment Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 9 (%) 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 SIL Investments and BF Investment

The main advantage of trading using opposite SIL Investments and BF Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIL Investments 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 SIL Investments Limited 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.