Correlation Between Isras Investment and Avrot Industries

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

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

Diversification Opportunities for Isras Investment and Avrot Industries

0.35

Correlation Coefficient

Isras Investment  Avrot Industries

Weak diversification

The 3 months correlation between Isras and Avrot is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Isras Investment and Avrot Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avrot Industries and Isras Investment 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 Isras Investment 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 Isras Investment i.e., Isras Investment and Avrot Industries go up and down completely randomly.

Pair Corralation between Isras Investment and Avrot Industries

Assuming the 90 days trading horizon Isras Investment is expected to under-perform the Avrot Industries. But the stock apears to be less risky and, when comparing its historical volatility, Isras Investment is 1.38 times less risky than Avrot Industries. The stock trades about -0.1 of its potential returns per unit of risk. The Avrot Industries is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  5,200  in Avrot Industries on December 27, 2024 and sell it today you would lose (500.00) from holding Avrot Industries or give up 9.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.04%
Values	Daily Returns

Isras Investment  vs.  Avrot Industries

Isras Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Isras Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Avrot Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avrot Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Isras Investment and Avrot Industries

The main advantage of trading using opposite Isras Investment and Avrot Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Isras Investment 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 Isras Investment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.