Correlation Between Dupont De and BF Utilities

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

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

Diversification Opportunities for Dupont De and BF Utilities

0.64

Correlation Coefficient

Dupont De  BF Utilities

Poor diversification

The 3 months correlation between Dupont and BFUTILITIE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and BF Utilities go up and down completely randomly.

Pair Corralation between Dupont De and BF Utilities

Allowing for the 90-day total investment horizon Dupont De is expected to generate 10.51 times less return on investment than BF Utilities. But when comparing it to its historical volatility, Dupont De Nemours is 3.03 times less risky than BF Utilities. It trades about 0.03 of its potential returns per unit of risk. BF Utilities Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  78,505  in BF Utilities Limited on August 31, 2024 and sell it today you would earn a total of  20,330  from holding BF Utilities Limited or generate 25.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Dupont De Nemours  vs.  BF Utilities Limited

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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

Pair Trading with Dupont De and BF Utilities

The main advantage of trading using opposite Dupont De and BF Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.

The idea behind Dupont De Nemours 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.