Correlation Between Clal Biotechnology and WhiteSmoke Software

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

Diversification Opportunities for Clal Biotechnology and WhiteSmoke Software

-0.62

Correlation Coefficient

Clal Biotechnology  WhiteSmoke Software

Excellent diversification

The 3 months correlation between Clal and WhiteSmoke is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and WhiteSmoke Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WhiteSmoke Software 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 WhiteSmoke Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WhiteSmoke Software has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and WhiteSmoke Software go up and down completely randomly.

Pair Corralation between Clal Biotechnology and WhiteSmoke Software

Assuming the 90 days trading horizon Clal Biotechnology Industries is expected to generate 0.4 times more return on investment than WhiteSmoke Software. However, Clal Biotechnology Industries is 2.48 times less risky than WhiteSmoke Software. It trades about -0.07 of its potential returns per unit of risk. WhiteSmoke Software is currently generating about -0.09 per unit of risk. If you would invest  3,780  in Clal Biotechnology Industries on September 2, 2024 and sell it today you would lose (100.00) from holding Clal Biotechnology Industries or give up 2.65% of portfolio value over 90 days.

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

Clal Biotechnology Industries  vs.  WhiteSmoke Software

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.

WhiteSmoke Software

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WhiteSmoke Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WhiteSmoke Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clal Biotechnology and WhiteSmoke Software

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

The idea behind Clal Biotechnology Industries and WhiteSmoke Software 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.