Correlation Between BKI Investment and MFF Capital

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

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

Diversification Opportunities for BKI Investment and MFF Capital

0.49

Correlation Coefficient

BKI Investment  MFF Capital

Very weak diversification

The 3 months correlation between BKI and MFF is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital Investments 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 MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of BKI Investment i.e., BKI Investment and MFF Capital go up and down completely randomly.

Pair Corralation between BKI Investment and MFF Capital

Assuming the 90 days trading horizon BKI Investment is expected to generate 0.74 times more return on investment than MFF Capital. However, BKI Investment is 1.35 times less risky than MFF Capital. It trades about -0.01 of its potential returns per unit of risk. MFF Capital Investments is currently generating about -0.12 per unit of risk. If you would invest  166.00  in BKI Investment on December 28, 2024 and sell it today you would lose (1.00) from holding BKI Investment or give up 0.6% 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.  MFF Capital Investments

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.

MFF Capital Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFF Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BKI Investment and MFF Capital

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

The idea behind BKI Investment and MFF Capital Investments 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.