Correlation Between B Communications and Malam Team

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

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

Diversification Opportunities for B Communications and Malam Team

0.8

Correlation Coefficient

B Communications  Malam Team

Very poor diversification

The 3 months correlation between BCOM and Malam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Malam Team in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malam Team 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 Malam Team. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malam Team has no effect on the direction of B Communications i.e., B Communications and Malam Team go up and down completely randomly.

Pair Corralation between B Communications and Malam Team

Assuming the 90 days trading horizon B Communications is expected to generate 1.16 times less return on investment than Malam Team. In addition to that, B Communications is 1.04 times more volatile than Malam Team. It trades about 0.18 of its total potential returns per unit of risk. Malam Team is currently generating about 0.22 per unit of volatility. If you would invest  793,200  in Malam Team on November 28, 2024 and sell it today you would earn a total of  188,700  from holding Malam Team or generate 23.79% 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.  Malam Team

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.

Malam Team

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Malam Team are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Malam Team sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with B Communications and Malam Team

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

The idea behind B Communications and Malam Team 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .