Correlation Between Emetals and BKI Investment

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

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

Diversification Opportunities for Emetals and BKI Investment

-0.45

Correlation Coefficient

Emetals  BKI Investment

Very good diversification

The 3 months correlation between Emetals and BKI is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Emetals and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Emetals 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 Emetals are associated (or correlated) with BKI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKI Investment has no effect on the direction of Emetals i.e., Emetals and BKI Investment go up and down completely randomly.

Pair Corralation between Emetals and BKI Investment

Assuming the 90 days trading horizon Emetals is expected to generate 7.27 times more return on investment than BKI Investment. However, Emetals is 7.27 times more volatile than BKI Investment. It trades about 0.1 of its potential returns per unit of risk. BKI Investment is currently generating about -0.04 per unit of risk. If you would invest  0.40  in Emetals on September 21, 2024 and sell it today you would earn a total of  0.10  from holding Emetals or generate 25.0% return on investment over 90 days.

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

Emetals  vs.  BKI Investment

Emetals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emetals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Emetals unveiled solid returns over the last few months and may actually be approaching a breakup point.

BKI Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BKI Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, BKI Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Emetals and BKI Investment

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

The idea behind Emetals and BKI Investment 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.