Correlation Between B Communications and C Mer
Can any of the company-specific risk be diversified away by investing in both B Communications and C Mer 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 C Mer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and C Mer Industries, you can compare the effects of market volatilities on B Communications and C Mer 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 C Mer. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and C Mer.
Diversification Opportunities for B Communications and C Mer
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BCOM and CMER is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and C Mer Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Mer Industries 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 C Mer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Mer Industries has no effect on the direction of B Communications i.e., B Communications and C Mer go up and down completely randomly.
Pair Corralation between B Communications and C Mer
Assuming the 90 days trading horizon B Communications is expected to generate 0.86 times more return on investment than C Mer. However, B Communications is 1.16 times less risky than C Mer. It trades about 0.33 of its potential returns per unit of risk. C Mer Industries is currently generating about -0.04 per unit of risk. If you would invest 134,400 in B Communications on September 1, 2024 and sell it today you would earn a total of 32,600 from holding B Communications or generate 24.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
B Communications vs. C Mer Industries
Performance |
| Timeline |
| B Communications |
| C Mer Industries |
B Communications and C Mer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and C Mer
The main advantage of trading using opposite B Communications and C Mer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, C Mer 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 C Mer will offset losses from the drop in C Mer's long position.| B Communications vs. Israel China Biotechnology | B Communications vs. The Gold Bond | B Communications vs. Overseas Commerce | B Communications vs. Big Tech 50 |
| C Mer vs. Arad | C Mer vs. Alony Hetz Properties | C Mer vs. Airport City | C Mer vs. Harel Insurance Investments |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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