Correlation Between Frequency Electronics and BK Technologies
Can any of the company-specific risk be diversified away by investing in both Frequency Electronics and BK Technologies 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 Frequency Electronics and BK Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frequency Electronics and BK Technologies, you can compare the effects of market volatilities on Frequency Electronics and BK Technologies 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 Frequency Electronics with a short position of BK Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frequency Electronics and BK Technologies.
Diversification Opportunities for Frequency Electronics and BK Technologies
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Frequency and BKTI is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies and Frequency Electronics 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 Frequency Electronics are associated (or correlated) with BK Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Technologies has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and BK Technologies go up and down completely randomly.
Pair Corralation between Frequency Electronics and BK Technologies
Given the investment horizon of 90 days Frequency Electronics is expected to generate 3.18 times less return on investment than BK Technologies. But when comparing it to its historical volatility, Frequency Electronics is 1.23 times less risky than BK Technologies. It trades about 0.06 of its potential returns per unit of risk. BK Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,181 in BK Technologies on August 27, 2024 and sell it today you would earn a total of 2,124 from holding BK Technologies or generate 179.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frequency Electronics vs. BK Technologies
Performance |
| Timeline |
| Frequency Electronics |
| BK Technologies |
Frequency Electronics and BK Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frequency Electronics and BK Technologies
The main advantage of trading using opposite Frequency Electronics and BK Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frequency Electronics position performs unexpectedly, BK Technologies 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 BK Technologies will offset losses from the drop in BK Technologies' long position.| Frequency Electronics vs. BK Technologies | Frequency Electronics vs. Actelis Networks | Frequency Electronics vs. Lantronix | Frequency Electronics vs. KVH Industries |
| BK Technologies vs. Frequency Electronics | BK Technologies vs. Actelis Networks | BK Technologies vs. Optical Cable | BK Technologies vs. Baylin Technologies |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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