Correlation Between BKI Investment and OD6 Metals

Can any of the company-specific risk be diversified away by investing in both BKI Investment and OD6 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 OD6 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 OD6 Metals, you can compare the effects of market volatilities on BKI Investment and OD6 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 OD6 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BKI Investment and OD6 Metals.

Diversification Opportunities for BKI Investment and OD6 Metals

-0.41

Correlation Coefficient

BKI Investment  OD6 Metals

Very good diversification

The 3 months correlation between BKI and OD6 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and OD6 Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OD6 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 OD6 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OD6 Metals has no effect on the direction of BKI Investment i.e., BKI Investment and OD6 Metals go up and down completely randomly.

Pair Corralation between BKI Investment and OD6 Metals

Assuming the 90 days trading horizon BKI Investment is expected to generate 23.79 times less return on investment than OD6 Metals. But when comparing it to its historical volatility, BKI Investment is 14.78 times less risky than OD6 Metals. It trades about 0.0 of its potential returns per unit of risk. OD6 Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.20  in OD6 Metals on September 3, 2024 and sell it today you would lose (1.00) from holding OD6 Metals or give up 23.81% of portfolio value over 90 days.

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

BKI Investment  vs.  OD6 Metals

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.

OD6 Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OD6 Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OD6 Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BKI Investment and OD6 Metals

The main advantage of trading using opposite BKI Investment and OD6 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BKI Investment position performs unexpectedly, OD6 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 OD6 Metals will offset losses from the drop in OD6 Metals' long position.

The idea behind BKI Investment and OD6 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.