Correlation Between Arad and Avrot Industries
Can any of the company-specific risk be diversified away by investing in both Arad and Avrot Industries 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 and Avrot Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arad and Avrot Industries, you can compare the effects of market volatilities on Arad and Avrot Industries 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 with a short position of Avrot Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad and Avrot Industries.
Diversification Opportunities for Arad and Avrot Industries
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Arad and Avrot is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Arad and Avrot Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avrot Industries and Arad 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 are associated (or correlated) with Avrot Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avrot Industries has no effect on the direction of Arad i.e., Arad and Avrot Industries go up and down completely randomly.
Pair Corralation between Arad and Avrot Industries
Assuming the 90 days trading horizon Arad is expected to generate 1.36 times more return on investment than Avrot Industries. However, Arad is 1.36 times more volatile than Avrot Industries. It trades about 0.49 of its potential returns per unit of risk. Avrot Industries is currently generating about -0.24 per unit of risk. If you would invest 503,500 in Arad on August 27, 2024 and sell it today you would earn a total of 45,800 from holding Arad or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arad vs. Avrot Industries
Performance |
| Timeline |
| Arad |
| Avrot Industries |
Arad and Avrot Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arad and Avrot Industries
The main advantage of trading using opposite Arad and Avrot Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad position performs unexpectedly, Avrot Industries 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 Avrot Industries will offset losses from the drop in Avrot Industries' long position.| Arad vs. Automatic Bank Services | Arad vs. EN Shoham Business | Arad vs. Rapac Communication Infrastructure | Arad vs. Tadiran Hldg |
| Avrot Industries vs. Arad | Avrot Industries vs. Alony Hetz Properties | Avrot Industries vs. Danel | Avrot Industries vs. Airport City |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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