Correlation Between V Mart and BF Investment

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

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

Diversification Opportunities for V Mart and BF Investment

-0.54

Correlation Coefficient

V Mart  BF Investment

Excellent diversification

The 3 months correlation between VMART and BFINVEST is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding V Mart 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 V Mart 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 V Mart 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 V Mart i.e., V Mart and BF Investment go up and down completely randomly.

Pair Corralation between V Mart and BF Investment

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the BF Investment. But the stock apears to be less risky and, when comparing its historical volatility, V Mart Retail Limited is 1.24 times less risky than BF Investment. The stock trades about -0.15 of its potential returns per unit of risk. The BF Investment Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  65,815  in BF Investment Limited on October 11, 2024 and sell it today you would lose (3,275) from holding BF Investment Limited or give up 4.98% of portfolio value over 90 days.

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

V Mart Retail Limited  vs.  BF Investment Limited

V Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Mart Retail 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BF Investment Limited

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, BF Investment is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with V Mart and BF Investment

The main advantage of trading using opposite V Mart and BF Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V Mart 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 V Mart 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.