Correlation Between Terminal X and Michman Basad

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

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

Diversification Opportunities for Terminal X and Michman Basad

0.74

Correlation Coefficient

Terminal X  Michman Basad

Poor diversification

The 3 months correlation between Terminal and Michman is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Terminal X Online and Michman Basad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Michman Basad and Terminal X 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 Terminal X Online are associated (or correlated) with Michman Basad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Michman Basad has no effect on the direction of Terminal X i.e., Terminal X and Michman Basad go up and down completely randomly.

Pair Corralation between Terminal X and Michman Basad

Assuming the 90 days trading horizon Terminal X Online is expected to under-perform the Michman Basad. In addition to that, Terminal X is 1.66 times more volatile than Michman Basad. It trades about -0.09 of its total potential returns per unit of risk. Michman Basad is currently generating about 0.03 per unit of volatility. If you would invest  2,488,000  in Michman Basad on December 30, 2024 and sell it today you would earn a total of  44,000  from holding Michman Basad or generate 1.77% return on investment over 90 days.

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

Terminal X Online  vs.  Michman Basad

Terminal X Online

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terminal X Online has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Michman Basad

Risk-Adjusted Performance

Weak

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

Pair Trading with Terminal X and Michman Basad

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

The idea behind Terminal X Online and Michman Basad 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.