Correlation Between STEEL EXCHANGE and BF Utilities

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

Diversification Opportunities for STEEL EXCHANGE and BF Utilities

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between STEEL and BFUTILITIE is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA 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 STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 STEEL EXCHANGE i.e., STEEL EXCHANGE and BF Utilities go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and BF Utilities

Assuming the 90 days trading horizon STEEL EXCHANGE is expected to generate 4.01 times less return on investment than BF Utilities. But when comparing it to its historical volatility, STEEL EXCHANGE INDIA is 2.02 times less risky than BF Utilities. It trades about 0.12 of its potential returns per unit of risk. BF Utilities Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  94,000  in BF Utilities Limited on September 21, 2024 and sell it today you would earn a total of  11,735  from holding BF Utilities Limited or generate 12.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

STEEL EXCHANGE INDIA  vs.  BF Utilities Limited

 Performance 
       Timeline  
STEEL EXCHANGE INDIA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STEEL EXCHANGE INDIA 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 forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
BF Utilities Limited 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BF Utilities Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, BF Utilities demonstrated solid returns over the last few months and may actually be approaching a breakup point.

STEEL EXCHANGE and BF Utilities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with STEEL EXCHANGE and BF Utilities

The main advantage of trading using opposite STEEL EXCHANGE and BF Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL EXCHANGE 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.
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The idea behind STEEL EXCHANGE INDIA 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.
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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