Correlation Between BKV and ConocoPhillips

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

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

Diversification Opportunities for BKV and ConocoPhillips

-0.36

Correlation Coefficient

BKV  ConocoPhillips

Very good diversification

The 3 months correlation between BKV and ConocoPhillips is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of BKV i.e., BKV and ConocoPhillips go up and down completely randomly.

Pair Corralation between BKV and ConocoPhillips

Considering the 90-day investment horizon BKV Corporation is expected to generate 1.87 times more return on investment than ConocoPhillips. However, BKV is 1.87 times more volatile than ConocoPhillips. It trades about 0.13 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.37 per unit of risk. If you would invest  2,142  in BKV Corporation on September 25, 2024 and sell it today you would earn a total of  113.00  from holding BKV Corporation or generate 5.28% return on investment over 90 days.

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

BKV Corp.  vs.  ConocoPhillips

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.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with BKV and ConocoPhillips

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

The idea behind BKV Corporation and ConocoPhillips 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.