Correlation Between B Communications and IDI Insurance
Can any of the company-specific risk be diversified away by investing in both B Communications and IDI Insurance 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 IDI Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and IDI Insurance, you can compare the effects of market volatilities on B Communications and IDI Insurance 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 IDI Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and IDI Insurance.
Diversification Opportunities for B Communications and IDI Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BCOM and IDI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and IDI Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDI Insurance 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 IDI Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDI Insurance has no effect on the direction of B Communications i.e., B Communications and IDI Insurance go up and down completely randomly.
Pair Corralation between B Communications and IDI Insurance
Assuming the 90 days trading horizon B Communications is expected to generate 10.47 times less return on investment than IDI Insurance. In addition to that, B Communications is 1.27 times more volatile than IDI Insurance. It trades about 0.01 of its total potential returns per unit of risk. IDI Insurance is currently generating about 0.09 per unit of volatility. If you would invest 698,339 in IDI Insurance on August 29, 2024 and sell it today you would earn a total of 631,661 from holding IDI Insurance or generate 90.45% 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. IDI Insurance
Performance |
| Timeline |
| B Communications |
| IDI Insurance |
B Communications and IDI Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and IDI Insurance
The main advantage of trading using opposite B Communications and IDI Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, IDI Insurance 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 IDI Insurance will offset losses from the drop in IDI Insurance's long position.| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Partner | B Communications vs. Cellcom Israel | B Communications vs. Tower Semiconductor |
| IDI Insurance vs. Bank Hapoalim | IDI Insurance vs. Israel Discount Bank | IDI Insurance vs. Bezeq Israeli Telecommunication | IDI Insurance vs. Elbit Systems |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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