Correlation Between BKI Investment and Errawarra Resources
Can any of the company-specific risk be diversified away by investing in both BKI Investment and Errawarra Resources 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 BKI Investment and Errawarra Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BKI Investment and Errawarra Resources, you can compare the effects of market volatilities on BKI Investment and Errawarra Resources 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 BKI Investment with a short position of Errawarra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BKI Investment and Errawarra Resources.
Diversification Opportunities for BKI Investment and Errawarra Resources
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BKI and Errawarra is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BKI Investment and Errawarra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Errawarra Resources and BKI Investment 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 BKI Investment are associated (or correlated) with Errawarra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Errawarra Resources has no effect on the direction of BKI Investment i.e., BKI Investment and Errawarra Resources go up and down completely randomly.
Pair Corralation between BKI Investment and Errawarra Resources
Assuming the 90 days trading horizon BKI Investment is expected to generate 0.05 times more return on investment than Errawarra Resources. However, BKI Investment is 19.48 times less risky than Errawarra Resources. It trades about 0.05 of its potential returns per unit of risk. Errawarra Resources is currently generating about -0.04 per unit of risk. If you would invest 172.00 in BKI Investment on August 30, 2024 and sell it today you would earn a total of 1.00 from holding BKI Investment or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BKI Investment vs. Errawarra Resources
Performance |
| Timeline |
| BKI Investment |
| Errawarra Resources |
BKI Investment and Errawarra Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BKI Investment and Errawarra Resources
The main advantage of trading using opposite BKI Investment and Errawarra Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BKI Investment position performs unexpectedly, Errawarra Resources 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 Errawarra Resources will offset losses from the drop in Errawarra Resources' long position.| BKI Investment vs. Clime Investment Management | BKI Investment vs. Bailador Technology Invest | BKI Investment vs. Hudson Investment Group | BKI Investment vs. Macquarie Technology Group |
| Errawarra Resources vs. Northern Star Resources | Errawarra Resources vs. Evolution Mining | Errawarra Resources vs. Bluescope Steel | Errawarra Resources vs. Sandfire Resources NL |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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