Correlation Between BKI Investment and Capricorn Metals

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

Diversification Opportunities for BKI Investment and Capricorn Metals

0.28

Correlation Coefficient

BKI Investment  Capricorn Metals

Modest diversification

The 3 months correlation between BKI and Capricorn is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and Capricorn Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn 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 Capricorn Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Metals has no effect on the direction of BKI Investment i.e., BKI Investment and Capricorn Metals go up and down completely randomly.

Pair Corralation between BKI Investment and Capricorn Metals

Assuming the 90 days trading horizon BKI Investment is expected to under-perform the Capricorn Metals. But the stock apears to be less risky and, when comparing its historical volatility, BKI Investment is 2.21 times less risky than Capricorn Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Capricorn Metals is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  635.00  in Capricorn Metals on December 30, 2024 and sell it today you would earn a total of  180.00  from holding Capricorn Metals or generate 28.35% return on investment over 90 days.

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

BKI Investment  vs.  Capricorn Metals

BKI Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days BKI Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Capricorn Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capricorn Metals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Capricorn Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BKI Investment and Capricorn Metals

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

The idea behind BKI Investment and Capricorn 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.