Correlation Between Magellan Financial and BKI Investment
Can any of the company-specific risk be diversified away by investing in both Magellan Financial 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 Magellan Financial and BKI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magellan Financial Group and BKI Investment, you can compare the effects of market volatilities on Magellan Financial 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 Magellan Financial with a short position of BKI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and BKI Investment.
Diversification Opportunities for Magellan Financial and BKI Investment
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Magellan and BKI is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment and Magellan 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 Magellan Financial Group 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 Magellan Financial i.e., Magellan Financial and BKI Investment go up and down completely randomly.
Pair Corralation between Magellan Financial and BKI Investment
Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 3.35 times more return on investment than BKI Investment. However, Magellan Financial is 3.35 times more volatile than BKI Investment. It trades about 0.07 of its potential returns per unit of risk. BKI Investment is currently generating about 0.02 per unit of risk. If you would invest 1,105 in Magellan Financial Group on October 26, 2024 and sell it today you would earn a total of 84.00 from holding Magellan Financial Group or generate 7.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. BKI Investment
Performance |
| Timeline |
| Magellan Financial |
| BKI Investment |
Magellan Financial and BKI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and BKI Investment
The main advantage of trading using opposite Magellan Financial and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial 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.| Magellan Financial vs. Ramsay Health Care | Magellan Financial vs. Sky Metals | Magellan Financial vs. Healthco Healthcare and | Magellan Financial vs. Fisher Paykel Healthcare |
| BKI Investment vs. Magellan Financial Group | BKI Investment vs. Autosports Group | BKI Investment vs. Macquarie Bank Limited | BKI Investment vs. Bell Financial Group |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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