Correlation Between Brand and Gaon
Can any of the company-specific risk be diversified away by investing in both Brand and Gaon 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 Brand and Gaon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brand Group and Gaon Group, you can compare the effects of market volatilities on Brand and Gaon 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 Brand with a short position of Gaon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brand and Gaon.
Diversification Opportunities for Brand and Gaon
Very weak diversification
The 3 months correlation between Brand and Gaon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Brand Group and Gaon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaon Group and Brand 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 Brand Group are associated (or correlated) with Gaon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaon Group has no effect on the direction of Brand i.e., Brand and Gaon go up and down completely randomly.
Pair Corralation between Brand and Gaon
Assuming the 90 days trading horizon Brand Group is expected to under-perform the Gaon. In addition to that, Brand is 1.28 times more volatile than Gaon Group. It trades about -0.58 of its total potential returns per unit of risk. Gaon Group is currently generating about -0.16 per unit of volatility. If you would invest 31,860 in Gaon Group on January 20, 2024 and sell it today you would lose (2,060) from holding Gaon Group or give up 6.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Brand Group vs. Gaon Group
Performance |
| Timeline |
| Brand Group |
| Gaon Group |
Brand and Gaon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brand and Gaon
The main advantage of trading using opposite Brand and Gaon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brand position performs unexpectedly, Gaon 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 Gaon will offset losses from the drop in Gaon's long position.| Brand vs. EN Shoham Business | Brand vs. Accel Solutions Group | Brand vs. Mivtach Shamir | Brand vs. Rani Zim Shopping |
| Gaon vs. Elbit Systems | Gaon vs. Bezeq Israeli Telecommunication | Gaon vs. Bank Hapoalim | Gaon vs. Teva Pharmaceutical Industries |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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