Correlation Between Arad and Big Tech
Can any of the company-specific risk be diversified away by investing in both Arad and Big Tech 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 Big Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arad and Big Tech 50, you can compare the effects of market volatilities on Arad and Big Tech 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 Big Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad and Big Tech.
Diversification Opportunities for Arad and Big Tech
Pay attention - limited upside
The 3 months correlation between Arad and Big is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Arad and Big Tech 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tech 50 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 Big Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tech 50 has no effect on the direction of Arad i.e., Arad and Big Tech go up and down completely randomly.
Pair Corralation between Arad and Big Tech
Assuming the 90 days trading horizon Arad is expected to generate 0.67 times more return on investment than Big Tech. However, Arad is 1.5 times less risky than Big Tech. It trades about -0.01 of its potential returns per unit of risk. Big Tech 50 is currently generating about -0.04 per unit of risk. If you would invest 561,002 in Arad on August 31, 2024 and sell it today you would lose (64,502) from holding Arad or give up 11.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arad vs. Big Tech 50
Performance |
| Timeline |
| Arad |
| Big Tech 50 |
Arad and Big Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arad and Big Tech
The main advantage of trading using opposite Arad and Big Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad position performs unexpectedly, Big Tech 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 Big Tech will offset losses from the drop in Big Tech's long position.| Arad vs. Israel China Biotechnology | Arad vs. Ilex Medical | Arad vs. Bio Meat Foodtech | Arad vs. B Communications |
| Big Tech vs. Generation Capital | Big Tech vs. Meitav Dash Investments | Big Tech vs. IBI Inv House | Big Tech vs. Mivtach Shamir |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |