Correlation Between B Communications and Petrochemical
Can any of the company-specific risk be diversified away by investing in both B Communications and Petrochemical 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 Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and Petrochemical, you can compare the effects of market volatilities on B Communications and Petrochemical 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 Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Petrochemical.
Diversification Opportunities for B Communications and Petrochemical
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BCOM and Petrochemical is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical 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 Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of B Communications i.e., B Communications and Petrochemical go up and down completely randomly.
Pair Corralation between B Communications and Petrochemical
Assuming the 90 days trading horizon B Communications is expected to under-perform the Petrochemical. But the stock apears to be less risky and, when comparing its historical volatility, B Communications is 1.17 times less risky than Petrochemical. The stock trades about 0.0 of its potential returns per unit of risk. The Petrochemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 18,000 in Petrochemical on August 26, 2024 and sell it today you would earn a total of 1,540 from holding Petrochemical or generate 8.56% 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. Petrochemical
Performance |
| Timeline |
| B Communications |
| Petrochemical |
B Communications and Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and Petrochemical
The main advantage of trading using opposite B Communications and Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, Petrochemical 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 Petrochemical will offset losses from the drop in Petrochemical's long position.| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Partner | B Communications vs. Cellcom Israel | B Communications vs. Tower Semiconductor |
| Petrochemical vs. Brainsway | Petrochemical vs. Mivne Real Estate | Petrochemical vs. Israel Land Development | Petrochemical vs. Bezeq Israeli Telecommunication |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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