Correlation Between B Communications and Lineage Cell
Can any of the company-specific risk be diversified away by investing in both B Communications and Lineage Cell 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 B Communications and Lineage Cell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and Lineage Cell Therapeutics, you can compare the effects of market volatilities on B Communications and Lineage Cell 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 B Communications with a short position of Lineage Cell. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Lineage Cell.
Diversification Opportunities for B Communications and Lineage Cell
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BCOM and Lineage is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell Therapeutics and B Communications 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 B Communications are associated (or correlated) with Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of B Communications i.e., B Communications and Lineage Cell go up and down completely randomly.
Pair Corralation between B Communications and Lineage Cell
Assuming the 90 days trading horizon B Communications is expected to generate 0.48 times more return on investment than Lineage Cell. However, B Communications is 2.1 times less risky than Lineage Cell. It trades about 0.39 of its potential returns per unit of risk. Lineage Cell Therapeutics is currently generating about -0.21 per unit of risk. If you would invest 132,500 in B Communications on September 4, 2024 and sell it today you would earn a total of 38,600 from holding B Communications or generate 29.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
B Communications vs. Lineage Cell Therapeutics
Performance |
| Timeline |
| B Communications |
| Lineage Cell Therapeutics |
B Communications and Lineage Cell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and Lineage Cell
The main advantage of trading using opposite B Communications and Lineage Cell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, Lineage Cell 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 Lineage Cell will offset losses from the drop in Lineage Cell's long position.| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Cellcom Israel | B Communications vs. Tower Semiconductor | B Communications vs. Israel Discount Bank |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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