Correlation Between Netz Hotels and B Communications
Can any of the company-specific risk be diversified away by investing in both Netz Hotels 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 Netz Hotels and B Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netz Hotels and B Communications, you can compare the effects of market volatilities on Netz Hotels 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 Netz Hotels with a short position of B Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netz Hotels and B Communications.
Diversification Opportunities for Netz Hotels and B Communications
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Netz and BCOM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Netz Hotels and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Netz Hotels 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 Netz Hotels 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 Netz Hotels i.e., Netz Hotels and B Communications go up and down completely randomly.
Pair Corralation between Netz Hotels and B Communications
Assuming the 90 days trading horizon Netz Hotels is expected to generate 2.83 times more return on investment than B Communications. However, Netz Hotels is 2.83 times more volatile than B Communications. It trades about 0.02 of its potential returns per unit of risk. B Communications is currently generating about 0.01 per unit of risk. 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 |
Netz Hotels vs. B Communications
Performance |
| Timeline |
| Netz Hotels |
| B Communications |
Netz Hotels and B Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netz Hotels and B Communications
The main advantage of trading using opposite Netz Hotels and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netz Hotels 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.| Netz Hotels vs. Direct Capital Investments | Netz Hotels vs. Brainsway | Netz Hotels vs. Mivne Real Estate | Netz Hotels vs. Photomyne |
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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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