Correlation Between Alkali Metals and BF Investment

Can any of the company-specific risk be diversified away by investing in both Alkali Metals and BF Investment 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 Alkali Metals and BF Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alkali Metals Limited and BF Investment Limited, you can compare the effects of market volatilities on Alkali Metals and BF Investment 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 Alkali Metals with a short position of BF Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkali Metals and BF Investment.

Diversification Opportunities for Alkali Metals and BF Investment

-0.45

Correlation Coefficient

Alkali Metals  BF Investment

Very good diversification

The 3 months correlation between Alkali and BFINVEST is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and BF Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BF Investment Limited and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with BF Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BF Investment Limited has no effect on the direction of Alkali Metals i.e., Alkali Metals and BF Investment go up and down completely randomly.

Pair Corralation between Alkali Metals and BF Investment

Assuming the 90 days trading horizon Alkali Metals is expected to generate 7.81 times less return on investment than BF Investment. In addition to that, Alkali Metals is 1.09 times more volatile than BF Investment Limited. It trades about 0.02 of its total potential returns per unit of risk. BF Investment Limited is currently generating about 0.13 per unit of volatility. If you would invest  58,745  in BF Investment Limited on September 4, 2024 and sell it today you would earn a total of  15,260  from holding BF Investment Limited or generate 25.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Alkali Metals Limited  vs.  BF Investment Limited

Alkali Metals Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alkali Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

BF Investment Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, BF Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and BF Investment

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

The idea behind Alkali Metals Limited and BF Investment 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.