Correlation Between B Communications and Spuntech

Can any of the company-specific risk be diversified away by investing in both B Communications and Spuntech 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 Spuntech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between B Communications and Spuntech, you can compare the effects of market volatilities on B Communications and Spuntech 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 Spuntech. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Spuntech.

Diversification Opportunities for B Communications and Spuntech

0.04

Correlation Coefficient

B Communications  Spuntech

Significant diversification

The 3 months correlation between BCOM and Spuntech is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Spuntech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spuntech 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 Spuntech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spuntech has no effect on the direction of B Communications i.e., B Communications and Spuntech go up and down completely randomly.

Pair Corralation between B Communications and Spuntech

Assuming the 90 days trading horizon B Communications is expected to generate 3.18 times less return on investment than Spuntech. In addition to that, B Communications is 1.02 times more volatile than Spuntech. It trades about 0.01 of its total potential returns per unit of risk. Spuntech is currently generating about 0.04 per unit of volatility. If you would invest  31,505  in Spuntech on September 16, 2024 and sell it today you would earn a total of  11,185  from holding Spuntech or generate 35.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

B Communications  vs.  Spuntech

B Communications

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Spuntech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spuntech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Spuntech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with B Communications and Spuntech

The main advantage of trading using opposite B Communications and Spuntech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, Spuntech 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 Spuntech will offset losses from the drop in Spuntech's long position.

The idea behind B Communications and Spuntech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.