Correlation Between Golan Plastic and Savoreat

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

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

Diversification Opportunities for Golan Plastic and Savoreat

0.04

Correlation Coefficient

Golan Plastic  Savoreat

Significant diversification

The 3 months correlation between Golan and Savoreat is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Golan Plastic and Savoreat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savoreat 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 Savoreat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savoreat has no effect on the direction of Golan Plastic i.e., Golan Plastic and Savoreat go up and down completely randomly.

Pair Corralation between Golan Plastic and Savoreat

Assuming the 90 days trading horizon Golan Plastic is expected to generate 0.38 times more return on investment than Savoreat. However, Golan Plastic is 2.6 times less risky than Savoreat. It trades about 0.12 of its potential returns per unit of risk. Savoreat is currently generating about -0.08 per unit of risk. If you would invest  123,800  in Golan Plastic on December 1, 2024 and sell it today you would earn a total of  14,200  from holding Golan Plastic or generate 11.47% return on investment over 90 days.

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

Golan Plastic  vs.  Savoreat

Golan Plastic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golan Plastic are ranked lower than 9 (%) 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.

Savoreat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Savoreat 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Golan Plastic and Savoreat

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

The idea behind Golan Plastic and Savoreat 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.