Correlation Between BK Technologies and NOVARTIS

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

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

Diversification Opportunities for BK Technologies and NOVARTIS

-0.02

Correlation Coefficient

BK Technologies  NOVARTIS

Good diversification

The 3 months correlation between BKTI and NOVARTIS is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BK Technologies and NOVARTIS CAPITAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAPITAL P 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 NOVARTIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVARTIS CAPITAL P has no effect on the direction of BK Technologies i.e., BK Technologies and NOVARTIS go up and down completely randomly.

Pair Corralation between BK Technologies and NOVARTIS

Given the investment horizon of 90 days BK Technologies is expected to under-perform the NOVARTIS. In addition to that, BK Technologies is 6.26 times more volatile than NOVARTIS CAPITAL P. It trades about -0.15 of its total potential returns per unit of risk. NOVARTIS CAPITAL P is currently generating about -0.2 per unit of volatility. If you would invest  9,504  in NOVARTIS CAPITAL P on October 26, 2024 and sell it today you would lose (213.00) from holding NOVARTIS CAPITAL P or give up 2.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

BK Technologies  vs.  NOVARTIS CAPITAL P

BK Technologies

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, BK Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NOVARTIS CAPITAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVARTIS CAPITAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVARTIS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BK Technologies and NOVARTIS

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

The idea behind BK Technologies and NOVARTIS CAPITAL P 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.