Correlation Between RSL Electronics and Arad
Can any of the company-specific risk be diversified away by investing in both RSL Electronics 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 RSL Electronics and Arad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RSL Electronics and Arad, you can compare the effects of market volatilities on RSL Electronics 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 RSL Electronics with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of RSL Electronics and Arad.
Diversification Opportunities for RSL Electronics and Arad
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between RSL and Arad is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding RSL Electronics and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and RSL Electronics 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 RSL Electronics 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 RSL Electronics i.e., RSL Electronics and Arad go up and down completely randomly.
Pair Corralation between RSL Electronics and Arad
Assuming the 90 days trading horizon RSL Electronics is expected to generate 1.54 times more return on investment than Arad. However, RSL Electronics is 1.54 times more volatile than Arad. It trades about 0.2 of its potential returns per unit of risk. Arad is currently generating about 0.05 per unit of risk. If you would invest 70,750 in RSL Electronics on August 29, 2024 and sell it today you would earn a total of 6,950 from holding RSL Electronics or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RSL Electronics vs. Arad
Performance |
| Timeline |
| RSL Electronics |
| Arad |
RSL Electronics and Arad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RSL Electronics and Arad
The main advantage of trading using opposite RSL Electronics and Arad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RSL Electronics 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.| RSL Electronics vs. Ormat Technologies | RSL Electronics vs. Multi Retail Group | RSL Electronics vs. Nova | RSL Electronics vs. B Communications |
| Arad vs. Alrov Properties Lodgings | Arad vs. Iargento Hi Tech | Arad vs. ICL Israel Chemicals | Arad vs. Computer Direct |
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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