Correlation Between B Communications and Arad Investment
Can any of the company-specific risk be diversified away by investing in both B Communications and Arad Investment 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 B Communications and Arad Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and Arad Investment Industrial, you can compare the effects of market volatilities on B Communications and Arad Investment 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 B Communications with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Arad Investment.
Diversification Opportunities for B Communications and Arad Investment
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BCOM and Arad is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Arad Investment Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad Investment Indu and B Communications 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 B Communications are associated (or correlated) with Arad Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad Investment Indu has no effect on the direction of B Communications i.e., B Communications and Arad Investment go up and down completely randomly.
Pair Corralation between B Communications and Arad Investment
Assuming the 90 days trading horizon B Communications is expected to generate 1.35 times less return on investment than Arad Investment. In addition to that, B Communications is 1.05 times more volatile than Arad Investment Industrial. It trades about 0.39 of its total potential returns per unit of risk. Arad Investment Industrial is currently generating about 0.54 per unit of volatility. If you would invest 946,000 in Arad Investment Industrial on August 29, 2024 and sell it today you would earn a total of 397,000 from holding Arad Investment Industrial or generate 41.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
B Communications vs. Arad Investment Industrial
Performance |
| Timeline |
| B Communications |
| Arad Investment Indu |
B Communications and Arad Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and Arad Investment
The main advantage of trading using opposite B Communications and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications position performs unexpectedly, Arad Investment 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 Arad Investment will offset losses from the drop in Arad Investment's long position.| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Tower Semiconductor | B Communications vs. Israel Discount Bank | B Communications vs. Holmes Place International |
| Arad Investment vs. Ormat Technologies | Arad Investment vs. Multi Retail Group | Arad Investment vs. Nova | Arad Investment vs. B Communications |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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