Correlation Between Arad Investment and Iargento

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

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

Diversification Opportunities for Arad Investment and Iargento

0.17

Correlation Coefficient

Arad Investment  Iargento

Average diversification

The 3 months correlation between Arad and Iargento is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and Iargento Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iargento Hi Tech and Arad Investment 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 Arad Investment Industrial are associated (or correlated) with Iargento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iargento Hi Tech has no effect on the direction of Arad Investment i.e., Arad Investment and Iargento go up and down completely randomly.

Pair Corralation between Arad Investment and Iargento

Assuming the 90 days trading horizon Arad Investment is expected to generate 210.29 times less return on investment than Iargento. But when comparing it to its historical volatility, Arad Investment Industrial is 18.0 times less risky than Iargento. It trades about 0.01 of its potential returns per unit of risk. Iargento Hi Tech is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  15,900  in Iargento Hi Tech on November 29, 2024 and sell it today you would lose (7,700) from holding Iargento Hi Tech or give up 48.43% of portfolio value over 90 days.

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

Arad Investment Industrial  vs.  Iargento Hi Tech

Arad Investment Indu

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arad Investment Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arad Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Iargento Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iargento Hi Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iargento is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arad Investment and Iargento

The main advantage of trading using opposite Arad Investment and Iargento positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad Investment position performs unexpectedly, Iargento 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 Iargento will offset losses from the drop in Iargento's long position.

The idea behind Arad Investment Industrial and Iargento Hi Tech 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.