Correlation Between Naranja Renta and BK Variable

Can any of the company-specific risk be diversified away by investing in both Naranja Renta and BK Variable 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 Naranja Renta and BK Variable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Naranja Renta Fija and BK Variable Internacional, you can compare the effects of market volatilities on Naranja Renta and BK Variable 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 Naranja Renta with a short position of BK Variable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naranja Renta and BK Variable.

Diversification Opportunities for Naranja Renta and BK Variable

0.29

Correlation Coefficient

Naranja Renta  BK Variable

Modest diversification

The 3 months correlation between Naranja and 0P0000120T is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Naranja Renta Fija and BK Variable Internacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Variable Internacional and Naranja Renta 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 Naranja Renta Fija are associated (or correlated) with BK Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Variable Internacional has no effect on the direction of Naranja Renta i.e., Naranja Renta and BK Variable go up and down completely randomly.

Pair Corralation between Naranja Renta and BK Variable

Assuming the 90 days trading horizon Naranja Renta Fija is expected to under-perform the BK Variable. But the fund apears to be less risky and, when comparing its historical volatility, Naranja Renta Fija is 5.31 times less risky than BK Variable. The fund trades about -0.17 of its potential returns per unit of risk. The BK Variable Internacional is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,751  in BK Variable Internacional on October 27, 2024 and sell it today you would earn a total of  75.00  from holding BK Variable Internacional or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Naranja Renta Fija  vs.  BK Variable Internacional

Naranja Renta Fija

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naranja Renta Fija has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Naranja Renta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BK Variable Internacional

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BK Variable Internacional are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, BK Variable may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Naranja Renta and BK Variable

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

The idea behind Naranja Renta Fija and BK Variable Internacional 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.