Correlation Between BKV and Fastighets

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

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

Diversification Opportunities for BKV and Fastighets

-0.65

Correlation Coefficient

BKV  Fastighets

Excellent diversification

The 3 months correlation between BKV and Fastighets is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Fastighets AB Balder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastighets AB Balder and BKV 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 BKV Corporation are associated (or correlated) with Fastighets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastighets AB Balder has no effect on the direction of BKV i.e., BKV and Fastighets go up and down completely randomly.

Pair Corralation between BKV and Fastighets

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.76 times more return on investment than Fastighets. However, BKV Corporation is 1.32 times less risky than Fastighets. It trades about 0.2 of its potential returns per unit of risk. Fastighets AB Balder is currently generating about -0.12 per unit of risk. If you would invest  1,805  in BKV Corporation on September 27, 2024 and sell it today you would earn a total of  450.00  from holding BKV Corporation or generate 24.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

BKV Corp.  vs.  Fastighets AB Balder

BKV Corporation

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BKV showed solid returns over the last few months and may actually be approaching a breakup point.

Fastighets AB Balder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fastighets AB Balder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BKV and Fastighets

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

The idea behind BKV Corporation and Fastighets AB Balder 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.