Correlation Between EN Shoham and Automatic Bank

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

Diversification Opportunities for EN Shoham and Automatic Bank

0.93

Correlation Coefficient

EN Shoham  Automatic Bank

Almost no diversification

The 3 months correlation between SHOM and Automatic is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding EN Shoham Business and Automatic Bank Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Bank Services 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 Automatic Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Bank Services has no effect on the direction of EN Shoham i.e., EN Shoham and Automatic Bank go up and down completely randomly.

Pair Corralation between EN Shoham and Automatic Bank

Assuming the 90 days trading horizon EN Shoham is expected to generate 2.23 times less return on investment than Automatic Bank. But when comparing it to its historical volatility, EN Shoham Business is 1.61 times less risky than Automatic Bank. It trades about 0.28 of its potential returns per unit of risk. Automatic Bank Services is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  141,600  in Automatic Bank Services on August 31, 2024 and sell it today you would earn a total of  72,000  from holding Automatic Bank Services or generate 50.85% return on investment over 90 days.

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

EN Shoham Business  vs.  Automatic Bank Services

EN Shoham Business

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EN Shoham Business are ranked lower than 22 (%) 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.

Automatic Bank Services

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Bank Services are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automatic Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EN Shoham and Automatic Bank

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

The idea behind EN Shoham Business and Automatic Bank Services 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.