Correlation Between Arad Investment and Gilat Telecom
Can any of the company-specific risk be diversified away by investing in both Arad Investment and Gilat Telecom 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 Gilat Telecom 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 Gilat Telecom Global, you can compare the effects of market volatilities on Arad Investment and Gilat Telecom 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 Gilat Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad Investment and Gilat Telecom.
Diversification Opportunities for Arad Investment and Gilat Telecom
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arad and Gilat is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and Gilat Telecom Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Telecom Global 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 Gilat Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Telecom Global has no effect on the direction of Arad Investment i.e., Arad Investment and Gilat Telecom go up and down completely randomly.
Pair Corralation between Arad Investment and Gilat Telecom
Assuming the 90 days trading horizon Arad Investment Industrial is expected to generate 0.68 times more return on investment than Gilat Telecom. However, Arad Investment Industrial is 1.48 times less risky than Gilat Telecom. It trades about 0.18 of its potential returns per unit of risk. Gilat Telecom Global is currently generating about 0.1 per unit of risk. If you would invest 730,800 in Arad Investment Industrial on November 3, 2024 and sell it today you would earn a total of 1,009,200 from holding Arad Investment Industrial or generate 138.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arad Investment Industrial vs. Gilat Telecom Global
Performance |
| Timeline |
| Arad Investment Indu |
| Gilat Telecom Global |
Arad Investment and Gilat Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arad Investment and Gilat Telecom
The main advantage of trading using opposite Arad Investment and Gilat Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad Investment position performs unexpectedly, Gilat Telecom 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 Gilat Telecom will offset losses from the drop in Gilat Telecom's long position.| Arad Investment vs. Arad | Arad Investment vs. Alony Hetz Properties | Arad Investment vs. Danel | Arad Investment vs. Airport City |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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