Correlation Between Alony Hetz and Arad

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

By analyzing existing cross correlation between Alony Hetz Properties and Arad, you can compare the effects of market volatilities on Alony Hetz 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 Alony Hetz with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alony Hetz and Arad.

Diversification Opportunities for Alony Hetz and Arad

0.67

Correlation Coefficient

Alony Hetz  Arad

Poor diversification

The 3 months correlation between Alony and Arad is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alony Hetz Properties and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Alony Hetz 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 Alony Hetz Properties 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 Alony Hetz i.e., Alony Hetz and Arad go up and down completely randomly.

Pair Corralation between Alony Hetz and Arad

Assuming the 90 days trading horizon Alony Hetz Properties is expected to generate 1.62 times more return on investment than Arad. However, Alony Hetz is 1.62 times more volatile than Arad. It trades about 0.11 of its potential returns per unit of risk. Arad is currently generating about 0.06 per unit of risk. If you would invest  277,000  in Alony Hetz Properties on September 1, 2024 and sell it today you would earn a total of  31,700  from holding Alony Hetz Properties or generate 11.44% return on investment over 90 days.

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

Alony Hetz Properties  vs.  Arad

Alony Hetz Properties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alony Hetz Properties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alony Hetz sustained solid returns over the last few months and may actually be approaching a breakup point.

Arad

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Arad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alony Hetz and Arad

The main advantage of trading using opposite Alony Hetz and Arad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alony Hetz 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.

The idea behind Alony Hetz Properties and Arad 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.