Correlation Between Clal Biotechnology and Aquarius Engines

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

By analyzing existing cross correlation between Clal Biotechnology Industries and Aquarius Engines AM, you can compare the effects of market volatilities on Clal Biotechnology and Aquarius Engines 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 Clal Biotechnology with a short position of Aquarius Engines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Biotechnology and Aquarius Engines.

Diversification Opportunities for Clal Biotechnology and Aquarius Engines

0.66

Correlation Coefficient

Clal Biotechnology  Aquarius Engines

Poor diversification

The 3 months correlation between Clal and Aquarius is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and Aquarius Engines AM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquarius Engines and Clal Biotechnology 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 Clal Biotechnology Industries are associated (or correlated) with Aquarius Engines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquarius Engines has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and Aquarius Engines go up and down completely randomly.

Pair Corralation between Clal Biotechnology and Aquarius Engines

Assuming the 90 days trading horizon Clal Biotechnology Industries is expected to generate 0.61 times more return on investment than Aquarius Engines. However, Clal Biotechnology Industries is 1.65 times less risky than Aquarius Engines. It trades about -0.06 of its potential returns per unit of risk. Aquarius Engines AM is currently generating about -0.09 per unit of risk. If you would invest  4,090  in Clal Biotechnology Industries on September 1, 2024 and sell it today you would lose (410.00) from holding Clal Biotechnology Industries or give up 10.02% of portfolio value over 90 days.

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

Clal Biotechnology Industries  vs.  Aquarius Engines AM

Clal Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aquarius Engines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquarius Engines AM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Clal Biotechnology and Aquarius Engines

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

The idea behind Clal Biotechnology Industries and Aquarius Engines AM 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.