Correlation Between BKV and Indonesia Energy

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

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

Diversification Opportunities for BKV and Indonesia Energy

0.54

Correlation Coefficient

BKV  Indonesia Energy

Very weak diversification

The 3 months correlation between BKV and Indonesia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Indonesia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesia Energy 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 Indonesia Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesia Energy has no effect on the direction of BKV i.e., BKV and Indonesia Energy go up and down completely randomly.

Pair Corralation between BKV and Indonesia Energy

If you would invest  294.00  in Indonesia Energy on December 27, 2024 and sell it today you would lose (15.00) from holding Indonesia Energy or give up 5.1% of portfolio value over 90 days.

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

BKV Corp.  vs.  Indonesia Energy

BKV Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days BKV Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Indonesia Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indonesia Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Indonesia Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BKV and Indonesia Energy

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

The idea behind BKV Corporation and Indonesia Energy 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.