Correlation Between Sure Tech and B Communications

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

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

Diversification Opportunities for Sure Tech and B Communications

0.6

Correlation Coefficient

Sure Tech  B Communications

Poor diversification

The 3 months correlation between Sure and BCOM is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sure Tech Investments LP and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Sure Tech 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 Sure Tech Investments LP 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 Sure Tech i.e., Sure Tech and B Communications go up and down completely randomly.

Pair Corralation between Sure Tech and B Communications

Assuming the 90 days trading horizon Sure Tech Investments LP is expected to generate 1.1 times more return on investment than B Communications. However, Sure Tech is 1.1 times more volatile than B Communications. It trades about 0.06 of its potential returns per unit of risk. B Communications is currently generating about 0.03 per unit of risk. If you would invest  44,803  in Sure Tech Investments LP on October 27, 2024 and sell it today you would earn a total of  28,717  from holding Sure Tech Investments LP or generate 64.1% return on investment over 90 days.

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

Sure Tech Investments LP  vs.  B Communications

Sure Tech Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sure Tech Investments LP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sure Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

B Communications

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 23 (%) 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 Sure Tech and B Communications

The main advantage of trading using opposite Sure Tech and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sure Tech 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 Sure Tech Investments LP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.