Correlation Between Aruma Resources and BKI Investment
Can any of the company-specific risk be diversified away by investing in both Aruma Resources 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 Aruma Resources and BKI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aruma Resources and BKI Investment, you can compare the effects of market volatilities on Aruma Resources 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 Aruma Resources with a short position of BKI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aruma Resources and BKI Investment.
Diversification Opportunities for Aruma Resources and BKI Investment
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aruma and BKI is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aruma Resources and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Aruma Resources 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 Aruma Resources 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 Aruma Resources i.e., Aruma Resources and BKI Investment go up and down completely randomly.
Pair Corralation between Aruma Resources and BKI Investment
Assuming the 90 days trading horizon Aruma Resources is expected to generate 13.05 times more return on investment than BKI Investment. However, Aruma Resources is 13.05 times more volatile than BKI Investment. It trades about 0.03 of its potential returns per unit of risk. BKI Investment is currently generating about 0.04 per unit of risk. If you would invest 1.60 in Aruma Resources on September 13, 2024 and sell it today you would lose (0.30) from holding Aruma Resources or give up 18.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aruma Resources vs. BKI Investment
Performance |
| Timeline |
| Aruma Resources |
| BKI Investment |
Aruma Resources and BKI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aruma Resources and BKI Investment
The main advantage of trading using opposite Aruma Resources and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aruma Resources 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.| Aruma Resources vs. MA Financial Group | Aruma Resources vs. Qbe Insurance Group | Aruma Resources vs. Oceania Healthcare | Aruma Resources vs. Medibank Private |
| BKI Investment vs. Australian Foundation Investment | BKI Investment vs. MFF Capital Investments | BKI Investment vs. Metrics Master Income | BKI Investment vs. L1 Long Short |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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