Correlation Between UTI Asset and BF Investment

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

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

Diversification Opportunities for UTI Asset and BF Investment

0.43

Correlation Coefficient

UTI Asset  BF Investment

Very weak diversification

The 3 months correlation between UTI and BFINVEST is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management 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 UTI Asset 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 UTI Asset Management 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 UTI Asset i.e., UTI Asset and BF Investment go up and down completely randomly.

Pair Corralation between UTI Asset and BF Investment

Assuming the 90 days trading horizon UTI Asset is expected to generate 2.38 times less return on investment than BF Investment. But when comparing it to its historical volatility, UTI Asset Management is 1.23 times less risky than BF Investment. It trades about 0.07 of its potential returns per unit of risk. BF Investment Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

UTI Asset Management  vs.  BF Investment Limited

UTI Asset Management

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, UTI Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 UTI Asset and BF Investment

The main advantage of trading using opposite UTI Asset and BF Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UTI Asset 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 UTI Asset Management 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.