Correlation Between B Communications and Plaza Centers

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

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

Diversification Opportunities for B Communications and Plaza Centers

-0.48

Correlation Coefficient

B Communications  Plaza Centers

Very good diversification

The 3 months correlation between BCOM and Plaza is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Plaza Centers NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Centers NV 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 Plaza Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Centers NV has no effect on the direction of B Communications i.e., B Communications and Plaza Centers go up and down completely randomly.

Pair Corralation between B Communications and Plaza Centers

Assuming the 90 days trading horizon B Communications is expected to generate 0.75 times more return on investment than Plaza Centers. However, B Communications is 1.34 times less risky than Plaza Centers. It trades about 0.29 of its potential returns per unit of risk. Plaza Centers NV is currently generating about -0.2 per unit of risk. If you would invest  116,400  in B Communications on August 31, 2024 and sell it today you would earn a total of  50,600  from holding B Communications or generate 43.47% return on investment over 90 days.

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

B Communications  vs.  Plaza Centers NV

B Communications

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 22 (%) 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.

Plaza Centers NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Centers NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with B Communications and Plaza Centers

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

The idea behind B Communications and Plaza Centers NV 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.