Correlation Between Max Financial and Bkm Industries

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

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

Diversification Opportunities for Max Financial and Bkm Industries

-0.67

Correlation Coefficient

Max Financial  Bkm Industries

Excellent diversification

The 3 months correlation between Max and Bkm is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and Bkm Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bkm Industries and Max Financial 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 Max Financial Services 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 Max Financial i.e., Max Financial and Bkm Industries go up and down completely randomly.

Pair Corralation between Max Financial and Bkm Industries

Assuming the 90 days trading horizon Max Financial is expected to generate 248.12 times less return on investment than Bkm Industries. But when comparing it to its historical volatility, Max Financial Services is 53.3 times less risky than Bkm Industries. It trades about 0.02 of its potential returns per unit of risk. Bkm Industries Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Bkm Industries Limited on September 28, 2024 and sell it today you would earn a total of  4,357  from holding Bkm Industries Limited or generate 3046.85% return on investment over 90 days.

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

Max Financial Services  vs.  Bkm Industries Limited

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 Max Financial and Bkm Industries

The main advantage of trading using opposite Max Financial and Bkm Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Max Financial 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 Max Financial Services 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.