Correlation Between Dan Hotels and B Communications

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

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

Diversification Opportunities for Dan Hotels and B Communications

-0.51

Correlation Coefficient

Dan Hotels  B Communications

Excellent diversification

The 3 months correlation between Dan and BCOM is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dan Hotels and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Dan Hotels 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 Dan Hotels 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 Dan Hotels i.e., Dan Hotels and B Communications go up and down completely randomly.

Pair Corralation between Dan Hotels and B Communications

Assuming the 90 days trading horizon Dan Hotels is expected to generate 27.72 times less return on investment than B Communications. But when comparing it to its historical volatility, Dan Hotels is 1.68 times less risky than B Communications. It trades about 0.02 of its potential returns per unit of risk. B Communications is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  113,000  in B Communications on September 12, 2024 and sell it today you would earn a total of  64,400  from holding B Communications or generate 56.99% return on investment over 90 days.

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

Dan Hotels  vs.  B Communications

Dan Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dan Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dan Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

B Communications

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 29 (%) 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 Dan Hotels and B Communications

The main advantage of trading using opposite Dan Hotels and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dan Hotels 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 Dan Hotels 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.