Correlation Between Clime Investment and BKI Investment

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

By analyzing existing cross correlation between Clime Investment Management and BKI Investment, you can compare the effects of market volatilities on Clime Investment and BKI Investment 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 Clime Investment with a short position of BKI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clime Investment and BKI Investment.

Diversification Opportunities for Clime Investment and BKI Investment

0.67

Correlation Coefficient

Clime Investment  BKI Investment

Poor diversification

The 3 months correlation between Clime and BKI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Clime Investment Management and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Clime Investment 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 Clime Investment Management are associated (or correlated) with BKI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKI Investment has no effect on the direction of Clime Investment i.e., Clime Investment and BKI Investment go up and down completely randomly.

Pair Corralation between Clime Investment and BKI Investment

Assuming the 90 days trading horizon Clime Investment Management is expected to under-perform the BKI Investment. In addition to that, Clime Investment is 2.56 times more volatile than BKI Investment. It trades about -0.03 of its total potential returns per unit of risk. BKI Investment is currently generating about -0.01 per unit of volatility. If you would invest  166.00  in BKI Investment on December 27, 2024 and sell it today you would lose (1.00) from holding BKI Investment or give up 0.6% of portfolio value over 90 days.

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

Clime Investment Management  vs.  BKI Investment

Clime Investment Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clime Investment Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Clime Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BKI Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days BKI Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, BKI Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Clime Investment and BKI Investment

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

The idea behind Clime Investment Management and BKI Investment 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.