Correlation Between BK Technologies and Research Frontiers

Can any of the company-specific risk be diversified away by investing in both BK Technologies and Research Frontiers 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 BK Technologies and Research Frontiers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BK Technologies and Research Frontiers Incorporated, you can compare the effects of market volatilities on BK Technologies and Research Frontiers 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 BK Technologies with a short position of Research Frontiers. Check out your portfolio center. Please also check ongoing floating volatility patterns of BK Technologies and Research Frontiers.

Diversification Opportunities for BK Technologies and Research Frontiers

0.62

Correlation Coefficient

BK Technologies  Research Frontiers

Poor diversification

The 3 months correlation between BKTI and Research is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BK Technologies and Research Frontiers Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Research Frontiers and BK Technologies 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 BK Technologies are associated (or correlated) with Research Frontiers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Research Frontiers has no effect on the direction of BK Technologies i.e., BK Technologies and Research Frontiers go up and down completely randomly.

Pair Corralation between BK Technologies and Research Frontiers

Given the investment horizon of 90 days BK Technologies is expected to generate 1.65 times more return on investment than Research Frontiers. However, BK Technologies is 1.65 times more volatile than Research Frontiers Incorporated. It trades about 0.03 of its potential returns per unit of risk. Research Frontiers Incorporated is currently generating about -0.2 per unit of risk. If you would invest  3,491  in BK Technologies on December 28, 2024 and sell it today you would earn a total of  109.00  from holding BK Technologies or generate 3.12% return on investment over 90 days.

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

BK Technologies  vs.  Research Frontiers Incorporate

BK Technologies

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, BK Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Research Frontiers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Research Frontiers Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BK Technologies and Research Frontiers

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

The idea behind BK Technologies and Research Frontiers Incorporated 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.