Correlation Between Azorim Investment and Arad Investment

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

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

Diversification Opportunities for Azorim Investment and Arad Investment

0.6

Correlation Coefficient

Azorim Investment  Arad Investment

Poor diversification

The 3 months correlation between Azorim and Arad is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Azorim Investment Development 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 Azorim 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 Azorim Investment Development 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 Azorim Investment i.e., Azorim Investment and Arad Investment go up and down completely randomly.

Pair Corralation between Azorim Investment and Arad Investment

Assuming the 90 days trading horizon Azorim Investment Development is expected to under-perform the Arad Investment. But the stock apears to be less risky and, when comparing its historical volatility, Azorim Investment Development is 1.26 times less risky than Arad Investment. The stock trades about -0.04 of its potential returns per unit of risk. The Arad Investment Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,340,000  in Arad Investment Industrial on December 2, 2024 and sell it today you would earn a total of  137,000  from holding Arad Investment Industrial or generate 10.22% return on investment over 90 days.

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

Azorim Investment Development  vs.  Arad Investment Industrial

Azorim Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azorim Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Azorim Investment and Arad Investment

The main advantage of trading using opposite Azorim Investment and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azorim Investment 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 Azorim Investment Development 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.