Correlation Between Arad Investment and B Communications
Can any of the company-specific risk be diversified away by investing in both Arad Investment 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 Arad Investment and B Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arad Investment Industrial and B Communications, you can compare the effects of market volatilities on Arad Investment 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 Arad Investment with a short position of B Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad Investment and B Communications.
Diversification Opportunities for Arad Investment and B Communications
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Arad and BCOM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Arad Investment 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 Arad Investment Industrial 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 Arad Investment i.e., Arad Investment and B Communications go up and down completely randomly.
Pair Corralation between Arad Investment and B Communications
Assuming the 90 days trading horizon Arad Investment Industrial is expected to under-perform the B Communications. In addition to that, Arad Investment is 1.76 times more volatile than B Communications. It trades about -0.01 of its total potential returns per unit of risk. B Communications is currently generating about 0.01 per unit of volatility. If you would invest 180,900 in B Communications on August 29, 2024 and sell it today you would lose (12,800) from holding B Communications or give up 7.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arad Investment Industrial vs. B Communications
Performance |
| Timeline |
| Arad Investment Indu |
| B Communications |
Arad Investment and B Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arad Investment and B Communications
The main advantage of trading using opposite Arad Investment and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad Investment 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.| Arad Investment vs. Ormat Technologies | Arad Investment vs. Multi Retail Group | Arad Investment vs. Nova | Arad Investment vs. B Communications |
| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Tower Semiconductor | B Communications vs. Israel Discount Bank | B Communications vs. Holmes Place International |
Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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