Correlation Between BF Investment and HDFC Life

Can any of the company-specific risk be diversified away by investing in both BF Investment and HDFC Life 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 HDFC Life 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 HDFC Life Insurance, you can compare the effects of market volatilities on BF Investment and HDFC Life 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 HDFC Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Investment and HDFC Life.

Diversification Opportunities for BF Investment and HDFC Life

-0.18

Correlation Coefficient

BF Investment  HDFC Life

Good diversification

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

Pair Corralation between BF Investment and HDFC Life

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the HDFC Life. In addition to that, BF Investment is 1.25 times more volatile than HDFC Life Insurance. It trades about -0.01 of its total potential returns per unit of risk. HDFC Life Insurance is currently generating about 0.11 per unit of volatility. If you would invest  70,270  in HDFC Life Insurance on April 25, 2025 and sell it today you would earn a total of  5,980  from holding HDFC Life Insurance or generate 8.51% 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.  HDFC Life Insurance

BF Investment Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BF Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BF Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

HDFC Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Life Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, HDFC Life may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BF Investment and HDFC Life

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

The idea behind BF Investment Limited and HDFC Life Insurance 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.