Correlation Between BK Technologies and Silicom

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

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

Diversification Opportunities for BK Technologies and Silicom

0.2

Correlation Coefficient

BK Technologies  Silicom

Modest diversification

The 3 months correlation between BKTI and Silicom is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BK Technologies and Silicom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicom 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 Silicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicom has no effect on the direction of BK Technologies i.e., BK Technologies and Silicom go up and down completely randomly.

Pair Corralation between BK Technologies and Silicom

Given the investment horizon of 90 days BK Technologies is expected to under-perform the Silicom. In addition to that, BK Technologies is 1.65 times more volatile than Silicom. It trades about -0.01 of its total potential returns per unit of risk. Silicom is currently generating about 0.0 per unit of volatility. If you would invest  1,543  in Silicom on December 28, 2024 and sell it today you would lose (47.00) from holding Silicom or give up 3.05% of portfolio value over 90 days.

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

BK Technologies  vs.  Silicom

BK Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days BK Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BK Technologies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Silicom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Silicom is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BK Technologies and Silicom

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

The idea behind BK Technologies and Silicom 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.