Correlation Between Indo Borax and BF Investment

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

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

Diversification Opportunities for Indo Borax and BF Investment

-0.07

Correlation Coefficient

Indo Borax  BF Investment

Good diversification

The 3 months correlation between Indo and BFINVEST is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals 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 Indo Borax 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 Indo Borax Chemicals 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 Indo Borax i.e., Indo Borax and BF Investment go up and down completely randomly.

Pair Corralation between Indo Borax and BF Investment

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to generate 1.59 times more return on investment than BF Investment. However, Indo Borax is 1.59 times more volatile than BF Investment Limited. It trades about 0.16 of its potential returns per unit of risk. BF Investment Limited is currently generating about -0.01 per unit of risk. If you would invest  20,384  in Indo Borax Chemicals on April 4, 2025 and sell it today you would earn a total of  1,442  from holding Indo Borax Chemicals or generate 7.07% return on investment over 90 days.

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

Indo Borax Chemicals  vs.  BF Investment Limited

Indo Borax Chemicals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Borax Chemicals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Indo Borax reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indo Borax and BF Investment

The main advantage of trading using opposite Indo Borax and BF Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Borax 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 Indo Borax Chemicals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.