Correlation Between EN Shoham and Bet Shemesh

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

Diversification Opportunities for EN Shoham and Bet Shemesh

0.43

Correlation Coefficient

EN Shoham  Bet Shemesh

Very weak diversification

The 3 months correlation between SHOM and Bet is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding EN Shoham Business and Bet Shemesh Engines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bet Shemesh Engines 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 Bet Shemesh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bet Shemesh Engines has no effect on the direction of EN Shoham i.e., EN Shoham and Bet Shemesh go up and down completely randomly.

Pair Corralation between EN Shoham and Bet Shemesh

Assuming the 90 days trading horizon EN Shoham is expected to generate 22.02 times less return on investment than Bet Shemesh. But when comparing it to its historical volatility, EN Shoham Business is 1.86 times less risky than Bet Shemesh. It trades about 0.03 of its potential returns per unit of risk. Bet Shemesh Engines is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,745,000  in Bet Shemesh Engines on December 26, 2024 and sell it today you would earn a total of  2,179,000  from holding Bet Shemesh Engines or generate 79.38% return on investment over 90 days.

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

EN Shoham Business  vs.  Bet Shemesh Engines

EN Shoham Business

Risk-Adjusted Performance

Weak

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

Bet Shemesh Engines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bet Shemesh Engines are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bet Shemesh sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EN Shoham and Bet Shemesh

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

The idea behind EN Shoham Business and Bet Shemesh Engines 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.