Correlation Between B Communications and Israel Opportunity

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

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

Diversification Opportunities for B Communications and Israel Opportunity

0.54

Correlation Coefficient

B Communications  Israel Opportunity

Very weak diversification

The 3 months correlation between BCOM and Israel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Israel Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Opportunity 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 Israel Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Opportunity has no effect on the direction of B Communications i.e., B Communications and Israel Opportunity go up and down completely randomly.

Pair Corralation between B Communications and Israel Opportunity

Assuming the 90 days trading horizon B Communications is expected to generate 2.8 times less return on investment than Israel Opportunity. But when comparing it to its historical volatility, B Communications is 2.99 times less risky than Israel Opportunity. It trades about 0.21 of its potential returns per unit of risk. Israel Opportunity is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,900  in Israel Opportunity on November 19, 2024 and sell it today you would earn a total of  5,800  from holding Israel Opportunity or generate 73.42% return on investment over 90 days.

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

B Communications  vs.  Israel Opportunity

B Communications

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 16 (%) 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.

Israel Opportunity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Opportunity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Opportunity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with B Communications and Israel Opportunity

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

The idea behind B Communications and Israel Opportunity 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.