Correlation Between BKV and Veren

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

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

Diversification Opportunities for BKV and Veren

-0.41

Correlation Coefficient

BKV  Veren

Very good diversification

The 3 months correlation between BKV and Veren is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Veren Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veren Inc 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 Veren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veren Inc has no effect on the direction of BKV i.e., BKV and Veren go up and down completely randomly.

Pair Corralation between BKV and Veren

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.79 times more return on investment than Veren. However, BKV Corporation is 1.26 times less risky than Veren. It trades about 0.25 of its potential returns per unit of risk. Veren Inc is currently generating about -0.07 per unit of risk. If you would invest  1,800  in BKV Corporation on October 25, 2024 and sell it today you would earn a total of  756.00  from holding BKV Corporation or generate 42.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	39.22%
Values	Daily Returns

BKV Corp.  vs.  Veren Inc

BKV Corporation

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 23 (%) 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.

Veren Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veren Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BKV and Veren

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

The idea behind BKV Corporation and Veren Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..