Correlation Between Vulcan Energy and BKI Investment

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

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

Diversification Opportunities for Vulcan Energy and BKI Investment

0.18

Correlation Coefficient

Vulcan Energy  BKI Investment

Average diversification

The 3 months correlation between Vulcan and BKI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Energy Resources and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Vulcan Energy 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 Vulcan Energy Resources 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 Vulcan Energy i.e., Vulcan Energy and BKI Investment go up and down completely randomly.

Pair Corralation between Vulcan Energy and BKI Investment

Assuming the 90 days trading horizon Vulcan Energy Resources is expected to generate 5.35 times more return on investment than BKI Investment. However, Vulcan Energy is 5.35 times more volatile than BKI Investment. It trades about 0.01 of its potential returns per unit of risk. BKI Investment is currently generating about 0.0 per unit of risk. If you would invest  716.00  in Vulcan Energy Resources on October 27, 2024 and sell it today you would lose (196.00) from holding Vulcan Energy Resources or give up 27.37% of portfolio value over 90 days.

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

Vulcan Energy Resources  vs.  BKI Investment

Vulcan Energy Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Vulcan Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BKI Investment

Risk-Adjusted Performance

0 of 100

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 Vulcan Energy and BKI Investment

The main advantage of trading using opposite Vulcan Energy and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Energy 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 Vulcan Energy Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.