Correlation Between Evogene and B Communications

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

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

Diversification Opportunities for Evogene and B Communications

-0.75

Correlation Coefficient

Evogene  B Communications

Pay attention - limited upside

The 3 months correlation between Evogene and BCOM is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Evogene and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Evogene 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 Evogene 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 Evogene i.e., Evogene and B Communications go up and down completely randomly.

Pair Corralation between Evogene and B Communications

Assuming the 90 days trading horizon Evogene is expected to under-perform the B Communications. In addition to that, Evogene is 2.12 times more volatile than B Communications. It trades about -0.07 of its total potential returns per unit of risk. B Communications is currently generating about 0.21 per unit of volatility. If you would invest  163,200  in B Communications on November 19, 2024 and sell it today you would earn a total of  40,300  from holding B Communications or generate 24.69% return on investment over 90 days.

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

Evogene  vs.  B Communications

Evogene

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evogene 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Evogene and B Communications

The main advantage of trading using opposite Evogene and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evogene 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 Evogene 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.