Correlation Between Amanet Management and Arad

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

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

Diversification Opportunities for Amanet Management and Arad

-0.28

Correlation Coefficient

Amanet Management  Arad

Very good diversification

The 3 months correlation between Amanet and Arad is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Amanet Management Systems and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Amanet Management 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 Amanet Management Systems 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 Amanet Management i.e., Amanet Management and Arad go up and down completely randomly.

Pair Corralation between Amanet Management and Arad

Assuming the 90 days trading horizon Amanet Management Systems is expected to generate 1.62 times more return on investment than Arad. However, Amanet Management is 1.62 times more volatile than Arad. It trades about 0.09 of its potential returns per unit of risk. Arad is currently generating about 0.03 per unit of risk. If you would invest  162,300  in Amanet Management Systems on December 1, 2024 and sell it today you would earn a total of  16,800  from holding Amanet Management Systems or generate 10.35% return on investment over 90 days.

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

Amanet Management Systems  vs.  Arad

Amanet Management Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amanet Management Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amanet Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Arad

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 2 (%) 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 Amanet Management and Arad

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

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.