Correlation Between Iargento and Arad Investment

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

By analyzing existing cross correlation between Iargento Hi Tech and Arad Investment Industrial, you can compare the effects of market volatilities on Iargento and Arad Investment 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 Iargento with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iargento and Arad Investment.

Diversification Opportunities for Iargento and Arad Investment

0.01

Correlation Coefficient

Iargento  Arad Investment

Significant diversification

The 3 months correlation between Iargento and Arad is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Iargento Hi Tech and Arad Investment Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad Investment Indu and Iargento 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 Iargento Hi Tech are associated (or correlated) with Arad Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad Investment Indu has no effect on the direction of Iargento i.e., Iargento and Arad Investment go up and down completely randomly.

Pair Corralation between Iargento and Arad Investment

Assuming the 90 days trading horizon Iargento Hi Tech is expected to under-perform the Arad Investment. In addition to that, Iargento is 1.29 times more volatile than Arad Investment Industrial. It trades about -0.02 of its total potential returns per unit of risk. Arad Investment Industrial is currently generating about 0.34 per unit of volatility. If you would invest  890,000  in Arad Investment Industrial on September 3, 2024 and sell it today you would earn a total of  481,000  from holding Arad Investment Industrial or generate 54.04% return on investment over 90 days.

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

Iargento Hi Tech  vs.  Arad Investment Industrial

Iargento Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Arad Investment Indu

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Arad Investment Industrial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arad Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iargento and Arad Investment

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

The idea behind Iargento Hi Tech and Arad Investment Industrial 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 Stocks Directory module to find actively traded stocks across global markets.