Correlation Between Partner and B Communications

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

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

Diversification Opportunities for Partner and B Communications

0.93

Correlation Coefficient

Partner  B Communications

Almost no diversification

The 3 months correlation between Partner and BCOM is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Partner and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Partner 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 Partner 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 Partner i.e., Partner and B Communications go up and down completely randomly.

Pair Corralation between Partner and B Communications

Assuming the 90 days trading horizon Partner is expected to generate 3.5 times less return on investment than B Communications. In addition to that, Partner is 1.0 times more volatile than B Communications. It trades about 0.0 of its total potential returns per unit of risk. B Communications is currently generating about 0.01 per unit of volatility. If you would invest  177,500  in B Communications on September 14, 2024 and sell it today you would lose (400.00) from holding B Communications or give up 0.23% of portfolio value over 90 days.

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

Partner  vs.  B Communications

Partner

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Partner are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Partner 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 Partner and B Communications

The main advantage of trading using opposite Partner and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Partner 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 Partner 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.