Correlation Between BKV and Community Bank

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

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

Diversification Opportunities for BKV and Community Bank

0.62

Correlation Coefficient

BKV  Community Bank

Poor diversification

The 3 months correlation between BKV and Community is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Community Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank has no effect on the direction of BKV i.e., BKV and Community Bank go up and down completely randomly.

Pair Corralation between BKV and Community Bank

If you would invest  2,142  in BKV Corporation on September 25, 2024 and sell it today you would earn a total of  27.00  from holding BKV Corporation or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

BKV Corp.  vs.  Community Bank

BKV Corporation

Risk-Adjusted Performance

15 of 100

Good

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.

Community Bank

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Community Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental drivers, Community Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BKV and Community Bank

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

The idea behind BKV Corporation and Community Bank 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.