Correlation Between Bridgestone and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both Bridgestone and Highlight Communications 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 Bridgestone and Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone and Highlight Communications AG, you can compare the effects of market volatilities on Bridgestone and Highlight Communications 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 Bridgestone with a short position of Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone and Highlight Communications.
Diversification Opportunities for Bridgestone and Highlight Communications
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bridgestone and Highlight is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and Bridgestone 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 Bridgestone are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of Bridgestone i.e., Bridgestone and Highlight Communications go up and down completely randomly.
Pair Corralation between Bridgestone and Highlight Communications
Assuming the 90 days trading horizon Bridgestone is expected to generate 0.51 times more return on investment than Highlight Communications. However, Bridgestone is 1.96 times less risky than Highlight Communications. It trades about -0.01 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.08 per unit of risk. If you would invest 1,714 in Bridgestone on September 14, 2024 and sell it today you would lose (114.00) from holding Bridgestone or give up 6.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgestone vs. Highlight Communications AG
Performance |
| Timeline |
| Bridgestone |
| Highlight Communications |
Bridgestone and Highlight Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone and Highlight Communications
The main advantage of trading using opposite Bridgestone and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.| Bridgestone vs. Highlight Communications AG | Bridgestone vs. Tower One Wireless | Bridgestone vs. NEWELL RUBBERMAID | Bridgestone vs. Consolidated Communications Holdings |
| Highlight Communications vs. The Walt Disney | Highlight Communications vs. Charter Communications | Highlight Communications vs. Warner Music Group | Highlight Communications vs. Superior Plus Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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