Correlation Between BK Variable and Naranja Renta

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

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

Diversification Opportunities for BK Variable and Naranja Renta

0.74

Correlation Coefficient

BK Variable  Naranja Renta

Poor diversification

The 3 months correlation between 0P0000120T and Naranja is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BK Variable Internacional and Naranja Renta Fija in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naranja Renta Fija and BK Variable 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 BK Variable Internacional are associated (or correlated) with Naranja Renta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naranja Renta Fija has no effect on the direction of BK Variable i.e., BK Variable and Naranja Renta go up and down completely randomly.

Pair Corralation between BK Variable and Naranja Renta

Assuming the 90 days trading horizon BK Variable Internacional is expected to generate 6.84 times more return on investment than Naranja Renta. However, BK Variable is 6.84 times more volatile than Naranja Renta Fija. It trades about -0.08 of its potential returns per unit of risk. Naranja Renta Fija is currently generating about -0.58 per unit of risk. If you would invest  1,788  in BK Variable Internacional on October 12, 2024 and sell it today you would lose (19.00) from holding BK Variable Internacional or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.68%
Values	Daily Returns

BK Variable Internacional  vs.  Naranja Renta Fija

BK Variable Internacional

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BK Variable Internacional are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, BK Variable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Naranja Renta Fija

Risk-Adjusted Performance

0 of 100

Modest

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.

Pair Trading with BK Variable and Naranja Renta

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

The idea behind BK Variable Internacional and Naranja Renta Fija 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.