Correlation Between Visa and Bkm Industries

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

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

Diversification Opportunities for Visa and Bkm Industries

0.71

Correlation Coefficient

Visa  Bkm Industries

Poor diversification

The 3 months correlation between Visa and Bkm is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Bkm Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bkm Industries and Visa 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 Visa Class A 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 Visa i.e., Visa and Bkm Industries go up and down completely randomly.

Pair Corralation between Visa and Bkm Industries

Taking into account the 90-day investment horizon Visa is expected to generate 58.42 times less return on investment than Bkm Industries. But when comparing it to its historical volatility, Visa Class A is 67.29 times less risky than Bkm Industries. It trades about 0.09 of its potential returns per unit of risk. Bkm Industries Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Bkm Industries Limited on September 24, 2024 and sell it today you would earn a total of  4,300  from holding Bkm Industries Limited or generate 2150.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.19%
Values	Daily Returns

Visa Class A  vs.  Bkm Industries Limited

Visa Class A

Risk-Adjusted Performance

17 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed 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 Visa and Bkm Industries

The main advantage of trading using opposite Visa and Bkm Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.