Correlation Between BKV and Woodside Energy

Can any of the company-specific risk be diversified away by investing in both BKV and Woodside 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 Woodside 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 Woodside Energy Group, you can compare the effects of market volatilities on BKV and Woodside 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 Woodside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BKV and Woodside Energy.

Diversification Opportunities for BKV and Woodside Energy

-0.53

Correlation Coefficient

BKV  Woodside Energy

Excellent diversification

The 3 months correlation between BKV and Woodside is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Woodside Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Energy Group 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 Woodside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Energy Group has no effect on the direction of BKV i.e., BKV and Woodside Energy go up and down completely randomly.

Pair Corralation between BKV and Woodside Energy

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.93 times more return on investment than Woodside Energy. However, BKV Corporation is 1.08 times less risky than Woodside Energy. It trades about 0.18 of its potential returns per unit of risk. Woodside Energy Group is currently generating about -0.12 per unit of risk. If you would invest  1,800  in BKV Corporation on September 24, 2024 and sell it today you would earn a total of  369.00  from holding BKV Corporation or generate 20.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

BKV Corp.  vs.  Woodside Energy Group

BKV Corporation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 13 (%) 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.

Woodside Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BKV and Woodside Energy

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

The idea behind BKV Corporation and Woodside Energy Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.