Correlation Between First International and Aran Research
Can any of the company-specific risk be diversified away by investing in both First International and Aran Research 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 First International and Aran Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First International Bank and Aran Research and, you can compare the effects of market volatilities on First International and Aran Research 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 First International with a short position of Aran Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of First International and Aran Research.
Diversification Opportunities for First International and Aran Research
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Aran is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding First International Bank and Aran Research and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aran Research and First International 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 First International Bank are associated (or correlated) with Aran Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aran Research has no effect on the direction of First International i.e., First International and Aran Research go up and down completely randomly.
Pair Corralation between First International and Aran Research
Assuming the 90 days trading horizon First International Bank is expected to under-perform the Aran Research. In addition to that, First International is 1.45 times more volatile than Aran Research and. It trades about -0.23 of its total potential returns per unit of risk. Aran Research and is currently generating about -0.19 per unit of volatility. If you would invest 215,300 in Aran Research and on January 19, 2024 and sell it today you would lose (12,300) from holding Aran Research and or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First International Bank vs. Aran Research and
Performance |
| Timeline |
| First International Bank |
| Aran Research |
First International and Aran Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First International and Aran Research
The main advantage of trading using opposite First International and Aran Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First International position performs unexpectedly, Aran Research 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 Aran Research will offset losses from the drop in Aran Research's long position.| First International vs. Rani Zim Shopping | First International vs. Accel Solutions Group | First International vs. Rapac Communication Infrastructure |
| Aran Research vs. EN Shoham Business | Aran Research vs. Accel Solutions Group | Aran Research vs. Mivtach Shamir | Aran Research vs. Rani Zim Shopping |
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.
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