Correlation Between Discount Investment and B Communications
Can any of the company-specific risk be diversified away by investing in both Discount Investment and B 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 Discount Investment and B Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discount Investment Corp and B Communications, you can compare the effects of market volatilities on Discount Investment and B 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 Discount Investment with a short position of B Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discount Investment and B Communications.
Diversification Opportunities for Discount Investment and B Communications
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discount and BCOM is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Discount Investment 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 Discount Investment Corp are associated (or correlated) with B Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Communications has no effect on the direction of Discount Investment i.e., Discount Investment and B Communications go up and down completely randomly.
Pair Corralation between Discount Investment and B Communications
Assuming the 90 days trading horizon Discount Investment is expected to generate 1.4 times less return on investment than B Communications. But when comparing it to its historical volatility, Discount Investment Corp is 1.03 times less risky than B Communications. It trades about 0.28 of its potential returns per unit of risk. B Communications is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 130,000 in B Communications on August 29, 2024 and sell it today you would earn a total of 38,100 from holding B Communications or generate 29.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discount Investment Corp vs. B Communications
Performance |
| Timeline |
| Discount Investment Corp |
| B Communications |
Discount Investment and B Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discount Investment and B Communications
The main advantage of trading using opposite Discount Investment and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discount Investment position performs unexpectedly, B 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 B Communications will offset losses from the drop in B Communications' long position.| Discount Investment vs. Ormat Technologies | Discount Investment vs. Multi Retail Group | Discount Investment vs. Nova | Discount Investment vs. B Communications |
| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Tower Semiconductor | B Communications vs. Israel Discount Bank | B Communications vs. Holmes Place International |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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