Correlation Between Michman Basad and Golan Plastic

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

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

Diversification Opportunities for Michman Basad and Golan Plastic

0.07

Correlation Coefficient

Michman Basad  Golan Plastic

Significant diversification

The 3 months correlation between Michman and Golan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Michman Basad and Golan Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golan Plastic and Michman Basad 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 Michman Basad are associated (or correlated) with Golan Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golan Plastic has no effect on the direction of Michman Basad i.e., Michman Basad and Golan Plastic go up and down completely randomly.

Pair Corralation between Michman Basad and Golan Plastic

Assuming the 90 days trading horizon Michman Basad is expected to generate 0.46 times more return on investment than Golan Plastic. However, Michman Basad is 2.17 times less risky than Golan Plastic. It trades about 0.03 of its potential returns per unit of risk. Golan Plastic is currently generating about -0.19 per unit of risk. If you would invest  2,488,000  in Michman Basad on December 30, 2024 and sell it today you would earn a total of  44,000  from holding Michman Basad or generate 1.77% return on investment over 90 days.

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

Michman Basad  vs.  Golan Plastic

Michman Basad

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Michman Basad are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Michman Basad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Golan Plastic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golan Plastic 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 Michman Basad and Golan Plastic

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

The idea behind Michman Basad and Golan Plastic 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.