Correlation Between BF Utilities and Home First

Can any of the company-specific risk be diversified away by investing in both BF Utilities and Home First 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 Home First 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 Home First Finance, you can compare the effects of market volatilities on BF Utilities and Home First 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 Home First. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Utilities and Home First.

Diversification Opportunities for BF Utilities and Home First

0.17

Correlation Coefficient

BF Utilities  Home First

Average diversification

The 3 months correlation between BFUTILITIE and Home is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BF Utilities Limited and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance 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 Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of BF Utilities i.e., BF Utilities and Home First go up and down completely randomly.

Pair Corralation between BF Utilities and Home First

Assuming the 90 days trading horizon BF Utilities is expected to generate 1.98 times less return on investment than Home First. In addition to that, BF Utilities is 1.18 times more volatile than Home First Finance. It trades about 0.04 of its total potential returns per unit of risk. Home First Finance is currently generating about 0.08 per unit of volatility. If you would invest  81,375  in Home First Finance on September 1, 2024 and sell it today you would earn a total of  23,840  from holding Home First Finance or generate 29.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BF Utilities Limited  vs.  Home First Finance

BF Utilities Limited

Risk-Adjusted Performance

8 of 100

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 weak basic indicators, BF Utilities demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Home First is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BF Utilities and Home First

The main advantage of trading using opposite BF Utilities and Home First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BF Utilities position performs unexpectedly, Home First 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 Home First will offset losses from the drop in Home First's long position.

The idea behind BF Utilities Limited and Home First Finance 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.