Correlation Between Naphtha and Equital
Can any of the company-specific risk be diversified away by investing in both Naphtha and Equital 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 Naphtha and Equital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naphtha and Equital, you can compare the effects of market volatilities on Naphtha and Equital 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 Naphtha with a short position of Equital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naphtha and Equital.
Diversification Opportunities for Naphtha and Equital
Poor diversification
The 3 months correlation between Naphtha and Equital is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Naphtha and Equital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equital and Naphtha 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 Naphtha are associated (or correlated) with Equital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equital has no effect on the direction of Naphtha i.e., Naphtha and Equital go up and down completely randomly.
Pair Corralation between Naphtha and Equital
Assuming the 90 days trading horizon Naphtha is expected to generate 0.9 times more return on investment than Equital. However, Naphtha is 1.11 times less risky than Equital. It trades about 0.1 of its potential returns per unit of risk. Equital is currently generating about 0.07 per unit of risk. If you would invest 171,500 in Naphtha on August 25, 2024 and sell it today you would earn a total of 80,900 from holding Naphtha or generate 47.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naphtha vs. Equital
Performance |
| Timeline |
| Naphtha |
| Equital |
Naphtha and Equital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naphtha and Equital
The main advantage of trading using opposite Naphtha and Equital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naphtha position performs unexpectedly, Equital 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 Equital will offset losses from the drop in Equital's long position.| Naphtha vs. Migdal Insurance | Naphtha vs. Harel Insurance Investments | Naphtha vs. Delek Automotive Systems | Naphtha vs. Airport City |
| Equital vs. Airport City | Equital vs. Naphtha | Equital vs. Menora Miv Hld | Equital vs. Delek Automotive Systems |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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