Correlation Between BKV and Nomura Holdings

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

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

Diversification Opportunities for BKV and Nomura Holdings

0.75

Correlation Coefficient

BKV  Nomura Holdings

Poor diversification

The 3 months correlation between BKV and Nomura is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Nomura Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings has no effect on the direction of BKV i.e., BKV and Nomura Holdings go up and down completely randomly.

Pair Corralation between BKV and Nomura Holdings

Considering the 90-day investment horizon BKV Corporation is expected to generate 0.4 times more return on investment than Nomura Holdings. However, BKV Corporation is 2.52 times less risky than Nomura Holdings. It trades about 0.19 of its potential returns per unit of risk. Nomura Holdings is currently generating about 0.08 per unit of risk. If you would invest  1,829  in BKV Corporation on September 28, 2024 and sell it today you would earn a total of  424.00  from holding BKV Corporation or generate 23.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

BKV Corp.  vs.  Nomura Holdings

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.

Nomura Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Nomura Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BKV and Nomura Holdings

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

The idea behind BKV Corporation and Nomura Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.