Correlation Between Aran Research and Arad Investment

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

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

Diversification Opportunities for Aran Research and Arad Investment

0.19

Correlation Coefficient

Aran Research  Arad Investment

Average diversification

The 3 months correlation between Aran and Arad is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aran Research and 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 Aran Research 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 Aran Research and 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 Aran Research i.e., Aran Research and Arad Investment go up and down completely randomly.

Pair Corralation between Aran Research and Arad Investment

Assuming the 90 days trading horizon Aran Research is expected to generate 1.29 times less return on investment than Arad Investment. But when comparing it to its historical volatility, Aran Research and is 1.21 times less risky than Arad Investment. It trades about 0.05 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,340,000  in Arad Investment Industrial on December 3, 2024 and sell it today you would earn a total of  94,000  from holding Arad Investment Industrial or generate 7.01% return on investment over 90 days.

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

Aran Research and  vs.  Arad Investment Industrial

Aran Research

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aran Research and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aran Research may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arad Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aran Research and Arad Investment

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

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.