Correlation Between Metrics Master and BKI Investment

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

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

Diversification Opportunities for Metrics Master and BKI Investment

0.26

Correlation Coefficient

Metrics Master  BKI Investment

Modest diversification

The 3 months correlation between Metrics and BKI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Metrics Master Income and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Metrics Master 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 Metrics Master Income 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 Metrics Master i.e., Metrics Master and BKI Investment go up and down completely randomly.

Pair Corralation between Metrics Master and BKI Investment

Assuming the 90 days trading horizon Metrics Master Income is expected to under-perform the BKI Investment. In addition to that, Metrics Master is 1.26 times more volatile than BKI Investment. It trades about -0.07 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 29, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Metrics Master Income  vs.  BKI Investment

Metrics Master Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metrics Master Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Metrics Master 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 Metrics Master and BKI Investment

The main advantage of trading using opposite Metrics Master and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metrics Master 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 Metrics Master Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.