Correlation Between Bodhi Tree and MRF
Can any of the company-specific risk be diversified away by investing in both Bodhi Tree and MRF 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 Bodhi Tree and MRF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bodhi Tree Multimedia and MRF Limited, you can compare the effects of market volatilities on Bodhi Tree and MRF 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 Bodhi Tree with a short position of MRF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodhi Tree and MRF.
Diversification Opportunities for Bodhi Tree and MRF
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bodhi and MRF is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bodhi Tree Multimedia and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Bodhi Tree 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 Bodhi Tree Multimedia are associated (or correlated) with MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Bodhi Tree i.e., Bodhi Tree and MRF go up and down completely randomly.
Pair Corralation between Bodhi Tree and MRF
Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to under-perform the MRF. In addition to that, Bodhi Tree is 3.0 times more volatile than MRF Limited. It trades about -0.01 of its total potential returns per unit of risk. MRF Limited is currently generating about -0.03 per unit of volatility. If you would invest 13,595,900 in MRF Limited on September 12, 2024 and sell it today you would lose (350,100) from holding MRF Limited or give up 2.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bodhi Tree Multimedia vs. MRF Limited
Performance |
| Timeline |
| Bodhi Tree Multimedia |
| MRF Limited |
Bodhi Tree and MRF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bodhi Tree and MRF
The main advantage of trading using opposite Bodhi Tree and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bodhi Tree position performs unexpectedly, MRF 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 MRF will offset losses from the drop in MRF's long position.| Bodhi Tree vs. Reliance Industries Limited | Bodhi Tree vs. State Bank of | Bodhi Tree vs. HDFC Bank Limited | Bodhi Tree vs. Oil Natural Gas |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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