Correlation Between Al Bad and Arad Investment

Can any of the company-specific risk be diversified away by investing in both Al Bad 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 Al Bad and Arad Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Al Bad Massuot Yitzhak and Arad Investment Industrial, you can compare the effects of market volatilities on Al Bad 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 Al Bad with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Bad and Arad Investment.

Diversification Opportunities for Al Bad and Arad Investment

0.65

Correlation Coefficient

Al Bad  Arad Investment

Poor diversification

The 3 months correlation between ALBA and Arad is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Al Bad Massuot Yitzhak 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 Al Bad 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 Al Bad Massuot Yitzhak 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 Al Bad i.e., Al Bad and Arad Investment go up and down completely randomly.

Pair Corralation between Al Bad and Arad Investment

Assuming the 90 days trading horizon Al Bad Massuot Yitzhak is expected to generate 0.85 times more return on investment than Arad Investment. However, Al Bad Massuot Yitzhak is 1.17 times less risky than Arad Investment. It trades about -0.12 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about -0.18 per unit of risk. If you would invest  193,000  in Al Bad Massuot Yitzhak on December 28, 2024 and sell it today you would lose (32,000) from holding Al Bad Massuot Yitzhak or give up 16.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Al Bad Massuot Yitzhak  vs.  Arad Investment Industrial

Al Bad Massuot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Al Bad Massuot Yitzhak has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Arad Investment Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arad Investment Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Al Bad and Arad Investment

The main advantage of trading using opposite Al Bad and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Al Bad 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 Al Bad Massuot Yitzhak 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.