Correlation Between B Communications and Netz Hotels
Can any of the company-specific risk be diversified away by investing in both B Communications and Netz Hotels 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 Netz Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and Netz Hotels, you can compare the effects of market volatilities on B Communications and Netz Hotels 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 Netz Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Netz Hotels.
Diversification Opportunities for B Communications and Netz Hotels
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BCOM and Netz is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Netz Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netz Hotels 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 Netz Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netz Hotels has no effect on the direction of B Communications i.e., B Communications and Netz Hotels go up and down completely randomly.
Pair Corralation between B Communications and Netz Hotels
Assuming the 90 days trading horizon B Communications is expected to generate 7.01 times less return on investment than Netz Hotels. But when comparing it to its historical volatility, B Communications is 2.83 times less risky than Netz Hotels. It trades about 0.01 of its potential returns per unit of risk. Netz Hotels is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,000 in Netz Hotels on August 29, 2024 and sell it today you would lose (1,590) from holding Netz Hotels or give up 31.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
B Communications vs. Netz Hotels
Performance |
| Timeline |
| B Communications |
| Netz Hotels |
B Communications and Netz Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and Netz Hotels
The main advantage of trading using opposite B Communications and Netz Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, Netz Hotels 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 Netz Hotels will offset losses from the drop in Netz Hotels' long position.| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Partner | B Communications vs. Cellcom Israel | B Communications vs. Tower Semiconductor |
| Netz Hotels vs. Direct Capital Investments | Netz Hotels vs. Brainsway | Netz Hotels vs. Mivne Real Estate | Netz Hotels vs. Photomyne |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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