Correlation Between BKI Investment and Aurelia Metals

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

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

Diversification Opportunities for BKI Investment and Aurelia Metals

0.71

Correlation Coefficient

BKI Investment  Aurelia Metals

Poor diversification

The 3 months correlation between BKI and Aurelia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and Aurelia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and BKI 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 BKI Investment are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of BKI Investment i.e., BKI Investment and Aurelia Metals go up and down completely randomly.

Pair Corralation between BKI Investment and Aurelia Metals

Assuming the 90 days trading horizon BKI Investment is expected to generate 19.13 times less return on investment than Aurelia Metals. But when comparing it to its historical volatility, BKI Investment is 4.99 times less risky than Aurelia Metals. It trades about 0.02 of its potential returns per unit of risk. Aurelia Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Aurelia Metals on December 2, 2024 and sell it today you would earn a total of  2.00  from holding Aurelia Metals or generate 11.11% return on investment over 90 days.

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

BKI Investment  vs.  Aurelia Metals

BKI Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BKI Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, BKI Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aurelia Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Aurelia Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BKI Investment and Aurelia Metals

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

The idea behind BKI Investment and Aurelia Metals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..