Correlation Between Arad and Photomyne
Can any of the company-specific risk be diversified away by investing in both Arad and Photomyne 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 Photomyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arad and Photomyne, you can compare the effects of market volatilities on Arad and Photomyne 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 Photomyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad and Photomyne.
Diversification Opportunities for Arad and Photomyne
Poor diversification
The 3 months correlation between Arad and Photomyne is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Arad and Photomyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photomyne 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 Photomyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photomyne has no effect on the direction of Arad i.e., Arad and Photomyne go up and down completely randomly.
Pair Corralation between Arad and Photomyne
Assuming the 90 days trading horizon Arad is expected to generate 1.67 times more return on investment than Photomyne. However, Arad is 1.67 times more volatile than Photomyne. It trades about 0.11 of its potential returns per unit of risk. Photomyne is currently generating about -0.14 per unit of risk. If you would invest 503,500 in Arad on August 29, 2024 and sell it today you would earn a total of 16,200 from holding Arad or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Arad vs. Photomyne
Performance |
| Timeline |
| Arad |
| Photomyne |
Arad and Photomyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arad and Photomyne
The main advantage of trading using opposite Arad and Photomyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad position performs unexpectedly, Photomyne 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 Photomyne will offset losses from the drop in Photomyne's long position.| Arad vs. Alrov Properties Lodgings | Arad vs. Iargento Hi Tech | Arad vs. ICL Israel Chemicals | Arad vs. Computer Direct |
| Photomyne vs. Priortech | Photomyne vs. Magic Software Enterprises | Photomyne vs. Ormat Technologies | Photomyne vs. Spuntech |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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