Correlation Between Clal Biotechnology and Sarine Technologies

Can any of the company-specific risk be diversified away by investing in both Clal Biotechnology and Sarine Technologies 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 Sarine Technologies 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 Sarine Technologies, you can compare the effects of market volatilities on Clal Biotechnology and Sarine Technologies 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 Sarine Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Biotechnology and Sarine Technologies.

Diversification Opportunities for Clal Biotechnology and Sarine Technologies

-0.1

Correlation Coefficient

Clal Biotechnology  Sarine Technologies

Good diversification

The 3 months correlation between Clal and Sarine is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and Sarine Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarine Technologies 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 Sarine Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarine Technologies has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and Sarine Technologies go up and down completely randomly.

Pair Corralation between Clal Biotechnology and Sarine Technologies

Assuming the 90 days trading horizon Clal Biotechnology Industries is expected to generate 1.71 times more return on investment than Sarine Technologies. However, Clal Biotechnology is 1.71 times more volatile than Sarine Technologies. It trades about -0.02 of its potential returns per unit of risk. Sarine Technologies is currently generating about -0.08 per unit of risk. If you would invest  6,030  in Clal Biotechnology Industries on August 31, 2024 and sell it today you would lose (2,350) from holding Clal Biotechnology Industries or give up 38.97% of portfolio value over 90 days.

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

Clal Biotechnology Industries  vs.  Sarine Technologies

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.

Sarine Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarine Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sarine Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clal Biotechnology and Sarine Technologies

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

The idea behind Clal Biotechnology Industries and Sarine Technologies 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.