Correlation Between Spencers Retail and BF Investment

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

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

Diversification Opportunities for Spencers Retail and BF Investment

0.8

Correlation Coefficient

Spencers Retail  BF Investment

Very poor diversification

The 3 months correlation between Spencers and BFINVEST is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail 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 Spencers Retail 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 Spencers Retail 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 Spencers Retail i.e., Spencers Retail and BF Investment go up and down completely randomly.

Pair Corralation between Spencers Retail and BF Investment

Assuming the 90 days trading horizon Spencers Retail Limited is expected to generate 1.17 times more return on investment than BF Investment. However, Spencers Retail is 1.17 times more volatile than BF Investment Limited. It trades about -0.07 of its potential returns per unit of risk. BF Investment Limited is currently generating about -0.15 per unit of risk. If you would invest  8,040  in Spencers Retail Limited on December 28, 2024 and sell it today you would lose (1,590) from holding Spencers Retail Limited or give up 19.78% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  BF Investment Limited

Spencers Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

BF Investment Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BF Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Spencers Retail and BF Investment

The main advantage of trading using opposite Spencers Retail and BF Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spencers Retail 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 Spencers Retail 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.