Correlation Between Key Tronic and BK Technologies

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

By analyzing existing cross correlation between Key Tronic and BK Technologies, you can compare the effects of market volatilities on Key Tronic 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 Key Tronic with a short position of BK Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Key Tronic and BK Technologies.

Diversification Opportunities for Key Tronic and BK Technologies

-0.32

Correlation Coefficient

Key Tronic  BK Technologies

Very good diversification

The 3 months correlation between Key and BKTI is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies and Key Tronic 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 Key Tronic 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 Key Tronic i.e., Key Tronic and BK Technologies go up and down completely randomly.

Pair Corralation between Key Tronic and BK Technologies

Given the investment horizon of 90 days Key Tronic is expected to generate 5.07 times less return on investment than BK Technologies. But when comparing it to its historical volatility, Key Tronic is 1.68 times less risky than BK Technologies. It trades about 0.01 of its potential returns per unit of risk. BK Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,207  in BK Technologies on March 2, 2024 and sell it today you would earn a total of  163.00  from holding BK Technologies or generate 13.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Key Tronic  vs.  BK Technologies

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BK Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, BK Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Key Tronic and BK Technologies

The main advantage of trading using opposite Key Tronic and BK Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Key Tronic 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.

The idea behind Key Tronic and BK Technologies 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.