Correlation Between Azrieli and Arad Investment
Can any of the company-specific risk be diversified away by investing in both Azrieli and Arad Investment 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 Azrieli and Arad Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azrieli Group and Arad Investment Industrial, you can compare the effects of market volatilities on Azrieli and Arad Investment 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 Azrieli with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azrieli and Arad Investment.
Diversification Opportunities for Azrieli and Arad Investment
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Azrieli and Arad is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Azrieli Group and Arad Investment Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad Investment Indu and Azrieli 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 Azrieli Group are associated (or correlated) with Arad Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad Investment Indu has no effect on the direction of Azrieli i.e., Azrieli and Arad Investment go up and down completely randomly.
Pair Corralation between Azrieli and Arad Investment
Assuming the 90 days trading horizon Azrieli Group is expected to generate 0.94 times more return on investment than Arad Investment. However, Azrieli Group is 1.06 times less risky than Arad Investment. It trades about -0.16 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about -0.3 per unit of risk. If you would invest 2,549,837 in Azrieli Group on January 30, 2024 and sell it today you would lose (124,837) from holding Azrieli Group or give up 4.9% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Azrieli Group vs. Arad Investment Industrial
Performance |
Timeline |
Azrieli Group |
Arad Investment Indu |
Azrieli and Arad Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Azrieli and Arad Investment
The main advantage of trading using opposite Azrieli and Arad Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azrieli position performs unexpectedly, Arad Investment 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 Arad Investment will offset losses from the drop in Arad Investment's long position.The idea behind Azrieli Group and Arad Investment Industrial 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.Arad Investment vs. Nice | Arad Investment vs. Bank Leumi Le Israel | Arad Investment vs. Teva Pharmaceutical Industries | Arad Investment vs. Bank Hapoalim |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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