Correlation Between BF Investment and Selan Exploration

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Can any of the company-specific risk be diversified away by investing in both BF Investment and Selan Exploration 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 BF Investment and Selan Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BF Investment Limited and Selan Exploration Technology, you can compare the effects of market volatilities on BF Investment and Selan Exploration 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 BF Investment with a short position of Selan Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Investment and Selan Exploration.

Diversification Opportunities for BF Investment and Selan Exploration

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between BFINVEST and Selan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration and BF Investment 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 BF Investment Limited are associated (or correlated) with Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of BF Investment i.e., BF Investment and Selan Exploration go up and down completely randomly.

Pair Corralation between BF Investment and Selan Exploration

Assuming the 90 days trading horizon BF Investment Limited is expected to generate 0.65 times more return on investment than Selan Exploration. However, BF Investment Limited is 1.53 times less risky than Selan Exploration. It trades about -0.14 of its potential returns per unit of risk. Selan Exploration Technology is currently generating about -0.13 per unit of risk. If you would invest  63,810  in BF Investment Limited on November 8, 2024 and sell it today you would lose (6,365) from holding BF Investment Limited or give up 9.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

BF Investment Limited  vs.  Selan Exploration Technology

 Performance 
       Timeline  
BF Investment Limited 

Risk-Adjusted Performance

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Weak
 
Strong
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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Selan Exploration 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BF Investment and Selan Exploration Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BF Investment and Selan Exploration

The main advantage of trading using opposite BF Investment and Selan Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BF Investment position performs unexpectedly, Selan Exploration 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 Selan Exploration will offset losses from the drop in Selan Exploration's long position.
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The idea behind BF Investment Limited and Selan Exploration Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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