Correlation Between BF Investment and V Mart

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

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

Diversification Opportunities for BF Investment and V Mart

-0.18

Correlation Coefficient

BF Investment  V Mart

Good diversification

The 3 months correlation between BFINVEST and VMART is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and V Mart Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Mart Retail and BF Investment 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 Investment Limited are associated (or correlated) with V Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Mart Retail has no effect on the direction of BF Investment i.e., BF Investment and V Mart go up and down completely randomly.

Pair Corralation between BF Investment and V Mart

Assuming the 90 days trading horizon BF Investment Limited is expected to generate 1.05 times more return on investment than V Mart. However, BF Investment is 1.05 times more volatile than V Mart Retail Limited. It trades about 0.09 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about 0.05 per unit of risk. If you would invest  61,330  in BF Investment Limited on September 17, 2024 and sell it today you would earn a total of  10,400  from holding BF Investment Limited or generate 16.96% return on investment over 90 days.

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

BF Investment Limited  vs.  V Mart Retail Limited

BF Investment Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 7 (%) 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.

V Mart Retail

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V Mart Retail Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, V Mart may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BF Investment and V Mart

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

The idea behind BF Investment Limited and V Mart Retail 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.