Correlation Between EN Shoham and Arad Investment
Can any of the company-specific risk be diversified away by investing in both EN Shoham 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 EN Shoham and Arad Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EN Shoham Business and Arad Investment Industrial, you can compare the effects of market volatilities on EN Shoham 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 EN Shoham with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of EN Shoham and Arad Investment.
Diversification Opportunities for EN Shoham and Arad Investment
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SHOM and Arad is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding EN Shoham Business 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 EN Shoham 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 EN Shoham Business 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 EN Shoham i.e., EN Shoham and Arad Investment go up and down completely randomly.
Pair Corralation between EN Shoham and Arad Investment
Assuming the 90 days trading horizon EN Shoham is expected to generate 1.43 times less return on investment than Arad Investment. But when comparing it to its historical volatility, EN Shoham Business is 1.65 times less risky than Arad Investment. It trades about 0.2 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 898,600 in Arad Investment Industrial on September 3, 2024 and sell it today you would earn a total of 472,400 from holding Arad Investment Industrial or generate 52.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EN Shoham Business vs. Arad Investment Industrial
Performance |
| Timeline |
| EN Shoham Business |
| Arad Investment Indu |
EN Shoham and Arad Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EN Shoham and Arad Investment
The main advantage of trading using opposite EN Shoham and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EN Shoham 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.| EN Shoham vs. Menif Financial Services | EN Shoham vs. Accel Solutions Group | EN Shoham vs. Rani Zim Shopping | EN Shoham vs. Mivtach Shamir |
| Arad Investment vs. EN Shoham Business | Arad Investment vs. Accel Solutions Group | Arad Investment vs. Mivtach Shamir | Arad Investment vs. Rani Zim Shopping |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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