Correlation Between Meitav Dash and Arad Investment

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Can any of the company-specific risk be diversified away by investing in both Meitav Dash 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 Meitav Dash and Arad Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meitav Dash Investments and Arad Investment Industrial, you can compare the effects of market volatilities on Meitav Dash 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 Meitav Dash with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meitav Dash and Arad Investment.

Diversification Opportunities for Meitav Dash and Arad Investment

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Meitav and Arad is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Meitav Dash Investments 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 Meitav Dash 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 Meitav Dash Investments 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 Meitav Dash i.e., Meitav Dash and Arad Investment go up and down completely randomly.

Pair Corralation between Meitav Dash and Arad Investment

Assuming the 90 days trading horizon Meitav Dash Investments is expected to generate 0.82 times more return on investment than Arad Investment. However, Meitav Dash Investments is 1.22 times less risky than Arad Investment. It trades about 0.43 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about 0.14 per unit of risk. If you would invest  243,100  in Meitav Dash Investments on November 20, 2024 and sell it today you would earn a total of  161,600  from holding Meitav Dash Investments or generate 66.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Meitav Dash Investments  vs.  Arad Investment Industrial

 Performance 
       Timeline  
Meitav Dash Investments 

Risk-Adjusted Performance

Very Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Meitav Dash Investments are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Meitav Dash sustained solid returns over the last few months and may actually be approaching a breakup point.
Arad Investment Indu 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Arad Investment Industrial are ranked lower than 11 (%) 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.

Meitav Dash and Arad Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meitav Dash and Arad Investment

The main advantage of trading using opposite Meitav Dash and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meitav Dash 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 Meitav Dash Investments 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.
Check out your portfolio center.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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