Correlation Between Permian Resources and BKV

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

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

Diversification Opportunities for Permian Resources and BKV

0.7

Correlation Coefficient

Permian Resources  BKV

Poor diversification

The 3 months correlation between Permian and BKV is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and BKV Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKV Corporation and Permian Resources 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 Permian Resources are associated (or correlated) with BKV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKV Corporation has no effect on the direction of Permian Resources i.e., Permian Resources and BKV go up and down completely randomly.

Pair Corralation between Permian Resources and BKV

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 0.86 times more return on investment than BKV. However, Permian Resources is 1.17 times less risky than BKV. It trades about -0.22 of its potential returns per unit of risk. BKV Corporation is currently generating about -0.27 per unit of risk. If you would invest  1,514  in Permian Resources on December 11, 2024 and sell it today you would lose (281.00) from holding Permian Resources or give up 18.56% of portfolio value over 90 days.

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

Permian Resources  vs.  BKV Corp.

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

BKV Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days BKV Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward-looking signals remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Permian Resources and BKV

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

The idea behind Permian Resources and BKV Corporation 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.