Correlation Between Optical Cable and BK Technologies

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

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

Diversification Opportunities for Optical Cable and BK Technologies

0.12

Correlation Coefficient

Optical Cable  BK Technologies

Average diversification

The 3 months correlation between Optical and BKTI is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies and Optical Cable 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 Optical Cable 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 Optical Cable i.e., Optical Cable and BK Technologies go up and down completely randomly.

Pair Corralation between Optical Cable and BK Technologies

Considering the 90-day investment horizon Optical Cable is expected to under-perform the BK Technologies. In addition to that, Optical Cable is 1.39 times more volatile than BK Technologies. It trades about -0.02 of its total potential returns per unit of risk. BK Technologies is currently generating about -0.01 per unit of volatility. If you would invest  3,491  in BK Technologies on December 28, 2024 and sell it today you would lose (291.00) from holding BK Technologies or give up 8.34% of portfolio value over 90 days.

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

Optical Cable  vs.  BK Technologies

Optical Cable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optical Cable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BK Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days BK Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BK Technologies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Optical Cable and BK Technologies

The main advantage of trading using opposite Optical Cable and BK Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optical Cable 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 Optical Cable 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.