Correlation Between Viceroy Hotels and BF Utilities

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

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

Diversification Opportunities for Viceroy Hotels and BF Utilities

0.08

Correlation Coefficient

Viceroy Hotels  BF Utilities

Significant diversification

The 3 months correlation between Viceroy and BFUTILITIE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Viceroy Hotels Limited 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 Viceroy Hotels 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 Viceroy Hotels Limited 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 Viceroy Hotels i.e., Viceroy Hotels and BF Utilities go up and down completely randomly.

Pair Corralation between Viceroy Hotels and BF Utilities

Assuming the 90 days trading horizon Viceroy Hotels Limited is expected to under-perform the BF Utilities. But the stock apears to be less risky and, when comparing its historical volatility, Viceroy Hotels Limited is 1.02 times less risky than BF Utilities. The stock trades about -0.03 of its potential returns per unit of risk. The BF Utilities Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  102,485  in BF Utilities Limited on October 9, 2024 and sell it today you would lose (5,650) from holding BF Utilities Limited or give up 5.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Viceroy Hotels Limited  vs.  BF Utilities Limited

Viceroy Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viceroy Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Viceroy Hotels is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the 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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Viceroy Hotels and BF Utilities

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

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.