Correlation Between BKV and SMS Co,

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

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

Diversification Opportunities for BKV and SMS Co,

-0.73

Correlation Coefficient

BKV  SMS Co,

Pay attention - limited upside

The 3 months correlation between BKV and SMS is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and SMS Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMS Co, 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 SMS Co,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMS Co, has no effect on the direction of BKV i.e., BKV and SMS Co, go up and down completely randomly.

Pair Corralation between BKV and SMS Co,

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.7 times more return on investment than SMS Co,. However, BKV Corporation is 1.43 times less risky than SMS Co,. It trades about 0.26 of its potential returns per unit of risk. SMS Co, is currently generating about -0.16 per unit of risk. If you would invest  1,802  in BKV Corporation on October 14, 2024 and sell it today you would earn a total of  643.00  from holding BKV Corporation or generate 35.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

BKV Corp.  vs.  SMS Co,

BKV Corporation

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 20 (%) 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.

SMS Co,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMS Co, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BKV and SMS Co,

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

The idea behind BKV Corporation and SMS Co, 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.