Correlation Between BKV and Skyline

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

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

Diversification Opportunities for BKV and Skyline

0.39

Correlation Coefficient

BKV  Skyline

Weak diversification

The 3 months correlation between BKV and Skyline is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline 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 Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of BKV i.e., BKV and Skyline go up and down completely randomly.

Pair Corralation between BKV and Skyline

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.98 times more return on investment than Skyline. However, BKV Corporation is 1.02 times less risky than Skyline. It trades about 0.21 of its potential returns per unit of risk. Skyline is currently generating about -0.43 per unit of risk. If you would invest  2,158  in BKV Corporation on October 9, 2024 and sell it today you would earn a total of  194.00  from holding BKV Corporation or generate 8.99% return on investment over 90 days.

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

BKV Corp.  vs.  Skyline

BKV Corporation

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, BKV showed solid returns over the last few months and may actually be approaching a breakup point.

Skyline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Skyline is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BKV and Skyline

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

The idea behind BKV Corporation and Skyline 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.