Correlation Between BF Utilities and Rajnandini Metal

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

Diversification Opportunities for BF Utilities and Rajnandini Metal

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between BFUTILITIE and Rajnandini is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and BF Utilities 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 Utilities Limited are associated (or correlated) with Rajnandini Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rajnandini Metal has no effect on the direction of BF Utilities i.e., BF Utilities and Rajnandini Metal go up and down completely randomly.

Pair Corralation between BF Utilities and Rajnandini Metal

Assuming the 90 days trading horizon BF Utilities Limited is expected to generate 1.21 times more return on investment than Rajnandini Metal. However, BF Utilities is 1.21 times more volatile than Rajnandini Metal Limited. It trades about 0.39 of its potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.06 per unit of risk. If you would invest  82,830  in BF Utilities Limited on August 29, 2024 and sell it today you would earn a total of  15,895  from holding BF Utilities Limited or generate 19.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BF Utilities Limited  vs.  Rajnandini Metal Limited

 Performance 
       Timeline  
BF Utilities Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BF Utilities Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, BF Utilities demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Rajnandini Metal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

BF Utilities and Rajnandini Metal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BF Utilities and Rajnandini Metal

The main advantage of trading using opposite BF Utilities and Rajnandini Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BF Utilities position performs unexpectedly, Rajnandini Metal 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 Rajnandini Metal will offset losses from the drop in Rajnandini Metal's long position.
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The idea behind BF Utilities Limited and Rajnandini Metal 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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