Correlation Between EN Shoham and Arad Investment

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

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

Diversification Opportunities for EN Shoham and Arad Investment

0.38

Correlation Coefficient

EN Shoham  Arad Investment

Weak diversification

The 3 months correlation between SHOM and Arad is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding EN Shoham Business 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 EN Shoham 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 EN Shoham Business 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 EN Shoham i.e., EN Shoham and Arad Investment go up and down completely randomly.

Pair Corralation between EN Shoham and Arad Investment

Assuming the 90 days trading horizon EN Shoham Business is expected to generate 0.71 times more return on investment than Arad Investment. However, EN Shoham Business is 1.41 times less risky than Arad Investment. It trades about 0.05 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about -0.18 per unit of risk. If you would invest  79,800  in EN Shoham Business on December 29, 2024 and sell it today you would earn a total of  3,290  from holding EN Shoham Business or generate 4.12% return on investment over 90 days.

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

EN Shoham Business  vs.  Arad Investment Industrial

EN Shoham Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EN Shoham Business are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EN Shoham may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Arad Investment Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arad Investment Industrial 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 EN Shoham and Arad Investment

The main advantage of trading using opposite EN Shoham and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EN Shoham 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 EN Shoham Business 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.