Correlation Between Homebiogas and B Communications

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

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

Diversification Opportunities for Homebiogas and B Communications

-0.83

Correlation Coefficient

Homebiogas  B Communications

Pay attention - limited upside

The 3 months correlation between Homebiogas and BCOM is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Homebiogas and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Homebiogas 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 Homebiogas 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 Homebiogas i.e., Homebiogas and B Communications go up and down completely randomly.

Pair Corralation between Homebiogas and B Communications

Assuming the 90 days trading horizon Homebiogas is expected to generate 8.2 times more return on investment than B Communications. However, Homebiogas is 8.2 times more volatile than B Communications. It trades about 0.24 of its potential returns per unit of risk. B Communications is currently generating about 0.28 per unit of risk. If you would invest  7,160  in Homebiogas on September 14, 2024 and sell it today you would earn a total of  6,030  from holding Homebiogas or generate 84.22% return on investment over 90 days.

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

Homebiogas  vs.  B Communications

Homebiogas

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homebiogas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Homebiogas sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Homebiogas and B Communications

The main advantage of trading using opposite Homebiogas and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Homebiogas 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.

The idea behind Homebiogas and B Communications 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.