Correlation Between BKI Investment and Sandon Capital

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

Diversification Opportunities for BKI Investment and Sandon Capital

0.64

Correlation Coefficient

BKI Investment  Sandon Capital

Poor diversification

The 3 months correlation between BKI and Sandon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and Sandon Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandon Capital Inves 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 Sandon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandon Capital Inves has no effect on the direction of BKI Investment i.e., BKI Investment and Sandon Capital go up and down completely randomly.

Pair Corralation between BKI Investment and Sandon Capital

Assuming the 90 days trading horizon BKI Investment is expected to under-perform the Sandon Capital. But the stock apears to be less risky and, when comparing its historical volatility, BKI Investment is 1.66 times less risky than Sandon Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Sandon Capital Investments is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  76.00  in Sandon Capital Investments on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Sandon Capital Investments or generate 3.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

BKI Investment  vs.  Sandon 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.

Sandon Capital Inves

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandon Capital Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Sandon Capital 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 Sandon Capital

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

The idea behind BKI Investment and Sandon 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.