Correlation Between Arad and Isras Investment

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

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

Diversification Opportunities for Arad and Isras Investment

0.9

Correlation Coefficient

Arad  Isras Investment

Almost no diversification

The 3 months correlation between Arad and Isras is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arad and Isras Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isras Investment 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 Isras Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isras Investment has no effect on the direction of Arad i.e., Arad and Isras Investment go up and down completely randomly.

Pair Corralation between Arad and Isras Investment

Assuming the 90 days trading horizon Arad is expected to generate 7.53 times less return on investment than Isras Investment. But when comparing it to its historical volatility, Arad is 1.21 times less risky than Isras Investment. It trades about 0.04 of its potential returns per unit of risk. Isras Investment is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,898,966  in Isras Investment on September 3, 2024 and sell it today you would earn a total of  1,529,034  from holding Isras Investment or generate 22.16% return on investment over 90 days.

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

Arad  vs.  Isras Investment

Arad

Risk-Adjusted Performance

3 of 100

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.

Isras Investment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Isras Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Isras Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arad and Isras Investment

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

The idea behind Arad and Isras Investment 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .