Correlation Between B Communications and Lapidoth

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

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

Diversification Opportunities for B Communications and Lapidoth

0.88

Correlation Coefficient

B Communications  Lapidoth

Very poor diversification

The 3 months correlation between BCOM and Lapidoth is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Lapidoth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lapidoth 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 Lapidoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lapidoth has no effect on the direction of B Communications i.e., B Communications and Lapidoth go up and down completely randomly.

Pair Corralation between B Communications and Lapidoth

Assuming the 90 days trading horizon B Communications is expected to generate 0.92 times more return on investment than Lapidoth. However, B Communications is 1.08 times less risky than Lapidoth. It trades about 0.22 of its potential returns per unit of risk. Lapidoth is currently generating about -0.07 per unit of risk. If you would invest  188,000  in B Communications on November 28, 2024 and sell it today you would earn a total of  12,200  from holding B Communications or generate 6.49% return on investment over 90 days.

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

B Communications  vs.  Lapidoth

B Communications

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 14 (%) 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.

Lapidoth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lapidoth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lapidoth sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with B Communications and Lapidoth

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

The idea behind B Communications and Lapidoth 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.