Correlation Between Nova and Arad Investment
Can any of the company-specific risk be diversified away by investing in both Nova 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 Nova and Arad Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Arad Investment Industrial, you can compare the effects of market volatilities on Nova 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 Nova with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Arad Investment.
Diversification Opportunities for Nova and Arad Investment
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nova and Arad is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nova 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 Nova 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 Nova 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 Nova i.e., Nova and Arad Investment go up and down completely randomly.
Pair Corralation between Nova and Arad Investment
Assuming the 90 days trading horizon Nova is expected to under-perform the Arad Investment. But the stock apears to be less risky and, when comparing its historical volatility, Nova is 1.04 times less risky than Arad Investment. The stock trades about -0.14 of its potential returns per unit of risk. The Arad Investment Industrial is currently generating about 0.54 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Arad Investment Industrial
Performance |
| Timeline |
| Nova |
| Arad Investment Indu |
Nova and Arad Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Arad Investment
The main advantage of trading using opposite Nova and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova 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.The idea behind Nova and Arad Investment Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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