Correlation Between B Communications and Elco
Can any of the company-specific risk be diversified away by investing in both B Communications and Elco 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 Elco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and Elco, you can compare the effects of market volatilities on B Communications and Elco 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 Elco. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Elco.
Diversification Opportunities for B Communications and Elco
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BCOM and Elco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Elco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elco 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 Elco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elco has no effect on the direction of B Communications i.e., B Communications and Elco go up and down completely randomly.
Pair Corralation between B Communications and Elco
Assuming the 90 days trading horizon B Communications is expected to generate 2.44 times more return on investment than Elco. However, B Communications is 2.44 times more volatile than Elco. It trades about 0.37 of its potential returns per unit of risk. Elco is currently generating about 0.57 per unit of risk. If you would invest 131,200 in B Communications on August 30, 2024 and sell it today you would earn a total of 36,800 from holding B Communications or generate 28.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
B Communications vs. Elco
Performance |
| Timeline |
| B Communications |
| Elco |
B Communications and Elco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and Elco
The main advantage of trading using opposite B Communications and Elco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, Elco 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 Elco will offset losses from the drop in Elco's long position.| B Communications vs. Tower Semiconductor | B Communications vs. Israel Discount Bank | B Communications vs. Holmes Place International | B Communications vs. Nova |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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