Correlation Between Arad and Amanet Management

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

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

Diversification Opportunities for Arad and Amanet Management

-0.41

Correlation Coefficient

Arad  Amanet Management

Very good diversification

The 3 months correlation between Arad and Amanet is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Arad and Amanet Management Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amanet Management Systems and Arad 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 are associated (or correlated) with Amanet Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amanet Management Systems has no effect on the direction of Arad i.e., Arad and Amanet Management go up and down completely randomly.

Pair Corralation between Arad and Amanet Management

Assuming the 90 days trading horizon Arad is expected to generate 4.05 times less return on investment than Amanet Management. But when comparing it to its historical volatility, Arad is 1.62 times less risky than Amanet Management. It trades about 0.04 of its potential returns per unit of risk. Amanet Management Systems is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  162,300  in Amanet Management Systems on November 29, 2024 and sell it today you would earn a total of  18,600  from holding Amanet Management Systems or generate 11.46% return on investment over 90 days.

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

Arad  vs.  Amanet Management Systems

Arad

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 3 (%) 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.

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 8 (%) 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.

Pair Trading with Arad and Amanet Management

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

The idea behind Arad and Amanet Management Systems 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.