Correlation Between EN Shoham and Ashot Ashkelon

Can any of the company-specific risk be diversified away by investing in both EN Shoham and Ashot Ashkelon 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 Ashot Ashkelon 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 Ashot Ashkelon Industries, you can compare the effects of market volatilities on EN Shoham and Ashot Ashkelon 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 Ashot Ashkelon. Check out your portfolio center. Please also check ongoing floating volatility patterns of EN Shoham and Ashot Ashkelon.

Diversification Opportunities for EN Shoham and Ashot Ashkelon

0.73

Correlation Coefficient

EN Shoham  Ashot Ashkelon

Poor diversification

The 3 months correlation between SHOM and Ashot is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding EN Shoham Business and Ashot Ashkelon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashot Ashkelon Industries 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 Ashot Ashkelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashot Ashkelon Industries has no effect on the direction of EN Shoham i.e., EN Shoham and Ashot Ashkelon go up and down completely randomly.

Pair Corralation between EN Shoham and Ashot Ashkelon

Assuming the 90 days trading horizon EN Shoham is expected to generate 1.17 times less return on investment than Ashot Ashkelon. But when comparing it to its historical volatility, EN Shoham Business is 2.93 times less risky than Ashot Ashkelon. It trades about 0.37 of its potential returns per unit of risk. Ashot Ashkelon Industries is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  347,000  in Ashot Ashkelon Industries on September 4, 2024 and sell it today you would earn a total of  107,400  from holding Ashot Ashkelon Industries or generate 30.95% return on investment over 90 days.

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

EN Shoham Business  vs.  Ashot Ashkelon Industries

EN Shoham Business

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EN Shoham Business are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EN Shoham sustained solid returns over the last few months and may actually be approaching a breakup point.

Ashot Ashkelon Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ashot Ashkelon Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ashot Ashkelon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EN Shoham and Ashot Ashkelon

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

The idea behind EN Shoham Business and Ashot Ashkelon 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.