Correlation Between Investment Trust and Bombay Burmah

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

By analyzing existing cross correlation between The Investment Trust and Bombay Burmah Trading, you can compare the effects of market volatilities on Investment Trust and Bombay Burmah 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 Investment Trust with a short position of Bombay Burmah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Trust and Bombay Burmah.

Diversification Opportunities for Investment Trust and Bombay Burmah

0.2

Correlation Coefficient

Investment Trust  Bombay Burmah

Modest diversification

The 3 months correlation between Investment and Bombay is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Bombay Burmah Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombay Burmah Trading and Investment Trust 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 The Investment Trust are associated (or correlated) with Bombay Burmah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombay Burmah Trading has no effect on the direction of Investment Trust i.e., Investment Trust and Bombay Burmah go up and down completely randomly.

Pair Corralation between Investment Trust and Bombay Burmah

Assuming the 90 days trading horizon The Investment Trust is expected to generate 0.91 times more return on investment than Bombay Burmah. However, The Investment Trust is 1.1 times less risky than Bombay Burmah. It trades about 0.07 of its potential returns per unit of risk. Bombay Burmah Trading is currently generating about 0.0 per unit of risk. If you would invest  18,501  in The Investment Trust on September 2, 2024 and sell it today you would earn a total of  1,733  from holding The Investment Trust or generate 9.37% return on investment over 90 days.

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

The Investment Trust  vs.  Bombay Burmah Trading

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Investment Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bombay Burmah Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombay Burmah Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bombay Burmah is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Investment Trust and Bombay Burmah

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

The idea behind The Investment Trust and Bombay Burmah Trading 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.