Correlation Between Golan Plastic and Avrot Industries

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

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

Diversification Opportunities for Golan Plastic and Avrot Industries

-0.22

Correlation Coefficient

Golan Plastic  Avrot Industries

Very good diversification

The 3 months correlation between Golan and Avrot is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Golan Plastic and Avrot Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avrot Industries and Golan Plastic 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 Golan Plastic are associated (or correlated) with Avrot Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avrot Industries has no effect on the direction of Golan Plastic i.e., Golan Plastic and Avrot Industries go up and down completely randomly.

Pair Corralation between Golan Plastic and Avrot Industries

Assuming the 90 days trading horizon Golan Plastic is expected to generate 1.46 times more return on investment than Avrot Industries. However, Golan Plastic is 1.46 times more volatile than Avrot Industries. It trades about 0.36 of its potential returns per unit of risk. Avrot Industries is currently generating about 0.15 per unit of risk. If you would invest  93,900  in Golan Plastic on September 12, 2024 and sell it today you would earn a total of  45,100  from holding Golan Plastic or generate 48.03% return on investment over 90 days.

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

Golan Plastic  vs.  Avrot Industries

Golan Plastic

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Golan Plastic are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Golan Plastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Avrot Industries

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Golan Plastic and Avrot Industries

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

The idea behind Golan Plastic and Avrot Industries 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 Transaction History module to view history of all your transactions and understand their impact on performance.