Correlation Between Iteris and BK Technologies

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

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

Diversification Opportunities for Iteris and BK Technologies

0.71

Correlation Coefficient

Iteris  BK Technologies

Poor diversification

The 3 months correlation between Iteris and BKTI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Iteris Inc and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies and Iteris 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 Iteris Inc are associated (or correlated) with BK Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Technologies has no effect on the direction of Iteris i.e., Iteris and BK Technologies go up and down completely randomly.

Pair Corralation between Iteris and BK Technologies

Considering the 90-day investment horizon Iteris Inc is expected to generate 10.91 times more return on investment than BK Technologies. However, Iteris is 10.91 times more volatile than BK Technologies. It trades about 0.05 of its potential returns per unit of risk. BK Technologies is currently generating about 0.06 per unit of risk. If you would invest  288.00  in Iteris Inc on September 3, 2024 and sell it today you would earn a total of  26,361  from holding Iteris Inc or generate 9153.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.97%
Values	Daily Returns

Iteris Inc  vs.  BK Technologies

Iteris Inc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Iteris Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady basic indicators, Iteris demonstrated solid returns over the last few months and may actually be approaching a breakup point.

BK Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, BK Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iteris and BK Technologies

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

The idea behind Iteris Inc and BK Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.