Correlation Between Centum Electronics and Bkm Industries

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

By analyzing existing cross correlation between Centum Electronics Limited and Bkm Industries Limited, you can compare the effects of market volatilities on Centum Electronics and Bkm Industries 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 Centum Electronics with a short position of Bkm Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centum Electronics and Bkm Industries.

Diversification Opportunities for Centum Electronics and Bkm Industries

0.13

Correlation Coefficient

Centum Electronics  Bkm Industries

Average diversification

The 3 months correlation between Centum and Bkm is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Centum Electronics Limited and Bkm Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bkm Industries and Centum Electronics 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 Centum Electronics Limited are associated (or correlated) with Bkm Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bkm Industries has no effect on the direction of Centum Electronics i.e., Centum Electronics and Bkm Industries go up and down completely randomly.

Pair Corralation between Centum Electronics and Bkm Industries

Assuming the 90 days trading horizon Centum Electronics is expected to generate 54.16 times less return on investment than Bkm Industries. But when comparing it to its historical volatility, Centum Electronics Limited is 29.58 times less risky than Bkm Industries. It trades about 0.07 of its potential returns per unit of risk. Bkm Industries Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  164.00  in Bkm Industries Limited on September 24, 2024 and sell it today you would earn a total of  4,336  from holding Bkm Industries Limited or generate 2643.9% return on investment over 90 days.

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

Centum Electronics Limited  vs.  Bkm Industries Limited

Centum Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centum Electronics Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Centum Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Bkm Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bkm Industries Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Bkm Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centum Electronics and Bkm Industries

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

The idea behind Centum Electronics Limited and Bkm Industries Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.