Correlation Between Arad Investment and Automatic Bank
Can any of the company-specific risk be diversified away by investing in both Arad Investment and Automatic Bank 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 Automatic Bank 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 Automatic Bank Services, you can compare the effects of market volatilities on Arad Investment and Automatic Bank 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 Automatic Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad Investment and Automatic Bank.
Diversification Opportunities for Arad Investment and Automatic Bank
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Arad and Automatic is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and Automatic Bank Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Bank Services 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 Automatic Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Bank Services has no effect on the direction of Arad Investment i.e., Arad Investment and Automatic Bank go up and down completely randomly.
Pair Corralation between Arad Investment and Automatic Bank
Assuming the 90 days trading horizon Arad Investment Industrial is expected to under-perform the Automatic Bank. In addition to that, Arad Investment is 3.03 times more volatile than Automatic Bank Services. It trades about -0.01 of its total potential returns per unit of risk. Automatic Bank Services is currently generating about 0.12 per unit of volatility. If you would invest 159,667 in Automatic Bank Services on September 20, 2024 and sell it today you would earn a total of 91,633 from holding Automatic Bank Services or generate 57.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arad Investment Industrial vs. Automatic Bank Services
Performance |
| Timeline |
| Arad Investment Indu |
| Automatic Bank Services |
Arad Investment and Automatic Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arad Investment and Automatic Bank
The main advantage of trading using opposite Arad Investment and Automatic Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad Investment position performs unexpectedly, Automatic Bank 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 Automatic Bank will offset losses from the drop in Automatic Bank's long position.The idea behind Arad Investment Industrial and Automatic Bank Services 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.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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