Correlation Between Embassy Office and Bkm Industries

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

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

Diversification Opportunities for Embassy Office and Bkm Industries

-0.79

Correlation Coefficient

Embassy Office  Bkm Industries

Pay attention - limited upside

The 3 months correlation between Embassy and Bkm is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Office Parks and Bkm Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bkm Industries and Embassy Office 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 Embassy Office Parks 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 Embassy Office i.e., Embassy Office and Bkm Industries go up and down completely randomly.

Pair Corralation between Embassy Office and Bkm Industries

Assuming the 90 days trading horizon Embassy Office Parks is expected to under-perform the Bkm Industries. In addition to that, Embassy Office is 3.3 times more volatile than Bkm Industries Limited. It trades about -0.1 of its total potential returns per unit of risk. Bkm Industries Limited is currently generating about 0.22 per unit of volatility. If you would invest  4,400  in Bkm Industries Limited on September 23, 2024 and sell it today you would earn a total of  100.00  from holding Bkm Industries Limited or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Embassy Office Parks  vs.  Bkm Industries Limited

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 uncertain fundamental indicators, Bkm Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embassy Office and Bkm Industries

The main advantage of trading using opposite Embassy Office and Bkm Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embassy Office 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 Embassy Office Parks 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.