Correlation Between Rimoni and Kafrit

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

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

Diversification Opportunities for Rimoni and Kafrit

0.0

Correlation Coefficient

Rimoni  Kafrit

Pay attention - limited upside

The 3 months correlation between Rimoni and Kafrit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Rimoni and Kafrit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kafrit and Rimoni 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 Rimoni are associated (or correlated) with Kafrit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kafrit has no effect on the direction of Rimoni i.e., Rimoni and Kafrit go up and down completely randomly.

Pair Corralation between Rimoni and Kafrit

Assuming the 90 days trading horizon Rimoni is expected to under-perform the Kafrit. But the stock apears to be less risky and, when comparing its historical volatility, Rimoni is 1.82 times less risky than Kafrit. The stock trades about -0.04 of its potential returns per unit of risk. The Kafrit is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  286,900  in Kafrit on December 30, 2024 and sell it today you would lose (9,800) from holding Kafrit or give up 3.42% of portfolio value over 90 days.

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

Rimoni  vs.  Kafrit

Rimoni

Risk-Adjusted Performance

Very Weak

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

Kafrit

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rimoni and Kafrit

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

The idea behind Rimoni and Kafrit 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.