Correlation Between Medibank Private and BKI Investment

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

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

Diversification Opportunities for Medibank Private and BKI Investment

0.11

Correlation Coefficient

Medibank Private  BKI Investment

Average diversification

The 3 months correlation between Medibank and BKI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Medibank Private 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 Medibank Private 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 Medibank Private i.e., Medibank Private and BKI Investment go up and down completely randomly.

Pair Corralation between Medibank Private and BKI Investment

Assuming the 90 days trading horizon Medibank Private is expected to generate 1.76 times more return on investment than BKI Investment. However, Medibank Private is 1.76 times more volatile than BKI Investment. It trades about 0.18 of its potential returns per unit of risk. BKI Investment is currently generating about 0.02 per unit of risk. If you would invest  374.00  in Medibank Private on December 21, 2024 and sell it today you would earn a total of  64.00  from holding Medibank Private or generate 17.11% return on investment over 90 days.

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

Medibank Private  vs.  BKI Investment

Medibank Private

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Medibank Private 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medibank Private and BKI Investment

The main advantage of trading using opposite Medibank Private and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medibank Private 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 Medibank Private 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.