Correlation Between Bravura Solutions and Key Petroleum

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

By analyzing existing cross correlation between Bravura Solutions and Key Petroleum, you can compare the effects of market volatilities on Bravura Solutions and Key Petroleum 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 Bravura Solutions with a short position of Key Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bravura Solutions and Key Petroleum.

Diversification Opportunities for Bravura Solutions and Key Petroleum

-0.92

Correlation Coefficient

Bravura Solutions  Key Petroleum

Pay attention - limited upside

The 3 months correlation between Bravura and Key is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bravura Solutions and Key Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Key Petroleum and Bravura Solutions 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 Bravura Solutions are associated (or correlated) with Key Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Key Petroleum has no effect on the direction of Bravura Solutions i.e., Bravura Solutions and Key Petroleum go up and down completely randomly.

Pair Corralation between Bravura Solutions and Key Petroleum

Assuming the 90 days trading horizon Bravura Solutions is expected to generate 0.44 times more return on investment than Key Petroleum. However, Bravura Solutions is 2.27 times less risky than Key Petroleum. It trades about 0.11 of its potential returns per unit of risk. Key Petroleum is currently generating about 0.02 per unit of risk. If you would invest  50.00  in Bravura Solutions on September 23, 2024 and sell it today you would earn a total of  158.00  from holding Bravura Solutions or generate 316.0% return on investment over 90 days.

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

Bravura Solutions  vs.  Key Petroleum

Bravura Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Key Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bravura Solutions and Key Petroleum

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

The idea behind Bravura Solutions and Key Petroleum 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.