Correlation Between BKI Investment and Energy Resources

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

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

Diversification Opportunities for BKI Investment and Energy Resources

0.4

Correlation Coefficient

BKI Investment  Energy Resources

Very weak diversification

The 3 months correlation between BKI and Energy is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources 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 Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of BKI Investment i.e., BKI Investment and Energy Resources go up and down completely randomly.

Pair Corralation between BKI Investment and Energy Resources

Assuming the 90 days trading horizon BKI Investment is expected to generate 14.74 times less return on investment than Energy Resources. But when comparing it to its historical volatility, BKI Investment is 18.27 times less risky than Energy Resources. It trades about 0.03 of its potential returns per unit of risk. Energy Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3.15  in Energy Resources on September 19, 2024 and sell it today you would lose (2.95) from holding Energy Resources or give up 93.65% of portfolio value over 90 days.

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

BKI Investment  vs.  Energy Resources

BKI Investment

Risk-Adjusted Performance

0 of 100

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.

Energy Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Energy Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BKI Investment and Energy Resources

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

The idea behind BKI Investment and Energy Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.