Correlation Between Analyst IMS and Arad Investment

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

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

Diversification Opportunities for Analyst IMS and Arad Investment

-0.47

Correlation Coefficient

Analyst IMS  Arad Investment

Very good diversification

The 3 months correlation between Analyst and Arad is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Analyst IMS Investment 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 Analyst IMS 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 Analyst IMS Investment 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 Analyst IMS i.e., Analyst IMS and Arad Investment go up and down completely randomly.

Pair Corralation between Analyst IMS and Arad Investment

Assuming the 90 days trading horizon Analyst IMS Investment is expected to generate 0.63 times more return on investment than Arad Investment. However, Analyst IMS Investment is 1.59 times less risky than Arad Investment. It trades about 0.47 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  579,900  in Analyst IMS Investment on December 30, 2024 and sell it today you would earn a total of  340,100  from holding Analyst IMS Investment or generate 58.65% return on investment over 90 days.

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

Analyst IMS Investment  vs.  Arad Investment Industrial

Analyst IMS Investment

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Analyst IMS Investment are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Analyst IMS sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Analyst IMS and Arad Investment

The main advantage of trading using opposite Analyst IMS and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analyst IMS 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 Analyst IMS Investment 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.