Correlation Between BKV and Ferrexpo PLC

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

By analyzing existing cross correlation between BKV Corporation and Ferrexpo PLC, you can compare the effects of market volatilities on BKV and Ferrexpo PLC 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 BKV with a short position of Ferrexpo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BKV and Ferrexpo PLC.

Diversification Opportunities for BKV and Ferrexpo PLC

0.84

Correlation Coefficient

BKV  Ferrexpo PLC

Very poor diversification

The 3 months correlation between BKV and Ferrexpo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC and BKV 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 BKV Corporation are associated (or correlated) with Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of BKV i.e., BKV and Ferrexpo PLC go up and down completely randomly.

Pair Corralation between BKV and Ferrexpo PLC

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.33 times more return on investment than Ferrexpo PLC. However, BKV Corporation is 3.0 times less risky than Ferrexpo PLC. It trades about 0.2 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.01 per unit of risk. If you would invest  1,800  in BKV Corporation on September 30, 2024 and sell it today you would earn a total of  453.00  from holding BKV Corporation or generate 25.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	13.23%
Values	Daily Returns

BKV Corp.  vs.  Ferrexpo PLC

BKV Corporation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BKV showed solid returns over the last few months and may actually be approaching a breakup point.

Ferrexpo PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Ferrexpo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BKV and Ferrexpo PLC

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

The idea behind BKV Corporation and Ferrexpo PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.