Correlation Between Nice and Arad
Can any of the company-specific risk be diversified away by investing in both Nice and Arad 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 Nice and Arad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nice and Arad, you can compare the effects of market volatilities on Nice and Arad 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 Nice with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nice and Arad.
Diversification Opportunities for Nice and Arad
Very weak diversification
The 3 months correlation between Nice and Arad is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nice and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Nice 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 Nice are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Nice i.e., Nice and Arad go up and down completely randomly.
Pair Corralation between Nice and Arad
Assuming the 90 days trading horizon Nice is expected to generate 2.1 times more return on investment than Arad. However, Nice is 2.1 times more volatile than Arad. It trades about 0.04 of its potential returns per unit of risk. Arad is currently generating about 0.08 per unit of risk. If you would invest 6,228,000 in Nice on September 15, 2024 and sell it today you would earn a total of 529,000 from holding Nice or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nice vs. Arad
Performance |
| Timeline |
| Nice |
| Arad |
Nice and Arad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nice and Arad
The main advantage of trading using opposite Nice and Arad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nice position performs unexpectedly, Arad 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 will offset losses from the drop in Arad's long position.| Nice vs. Teva Pharmaceutical Industries | Nice vs. Elbit Systems | Nice vs. Bezeq Israeli Telecommunication | Nice vs. ICL Israel Chemicals |
| Arad vs. Iargento Hi Tech | Arad vs. Payment Financial Technologies | Arad vs. Blender Financial Technologies | Arad vs. TAT Technologies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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