Correlation Between Capricorn Metals and BKI Investment

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

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

Diversification Opportunities for Capricorn Metals and BKI Investment

0.73

Correlation Coefficient

Capricorn Metals  BKI Investment

Poor diversification

The 3 months correlation between Capricorn and BKI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Capricorn Metals and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Capricorn Metals 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 Capricorn Metals 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 Capricorn Metals i.e., Capricorn Metals and BKI Investment go up and down completely randomly.

Pair Corralation between Capricorn Metals and BKI Investment

Assuming the 90 days trading horizon Capricorn Metals is expected to generate 2.42 times more return on investment than BKI Investment. However, Capricorn Metals is 2.42 times more volatile than BKI Investment. It trades about 0.16 of its potential returns per unit of risk. BKI Investment is currently generating about 0.02 per unit of risk. If you would invest  641.00  in Capricorn Metals on December 1, 2024 and sell it today you would earn a total of  117.00  from holding Capricorn Metals or generate 18.25% return on investment over 90 days.

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

Capricorn Metals  vs.  BKI Investment

Capricorn Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capricorn Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Capricorn Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

BKI Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BKI Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Capricorn Metals and BKI Investment

The main advantage of trading using opposite Capricorn Metals and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capricorn Metals 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 Capricorn Metals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.