Correlation Between Hod Assaf and Baran

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

By analyzing existing cross correlation between Hod Assaf Industries and Baran Group, you can compare the effects of market volatilities on Hod Assaf and Baran 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 Hod Assaf with a short position of Baran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hod Assaf and Baran.

Diversification Opportunities for Hod Assaf and Baran

0.8

Correlation Coefficient

Hod Assaf  Baran

Very poor diversification

The 3 months correlation between Hod and Baran is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hod Assaf Industries and Baran Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baran Group and Hod Assaf 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 Hod Assaf Industries are associated (or correlated) with Baran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baran Group has no effect on the direction of Hod Assaf i.e., Hod Assaf and Baran go up and down completely randomly.

Pair Corralation between Hod Assaf and Baran

Assuming the 90 days trading horizon Hod Assaf Industries is expected to under-perform the Baran. In addition to that, Hod Assaf is 2.68 times more volatile than Baran Group. It trades about -0.1 of its total potential returns per unit of risk. Baran Group is currently generating about -0.08 per unit of volatility. If you would invest  112,500  in Baran Group on February 1, 2024 and sell it today you would lose (2,500) from holding Baran Group or give up 2.22% of portfolio value over 90 days.

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

Hod Assaf Industries  vs.  Baran Group

Hod Assaf Industries

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Hod Assaf Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental indicators, Hod Assaf sustained solid returns over the last few months and may actually be approaching a breakup point.

Baran Group

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Baran Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Baran sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hod Assaf and Baran

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

The idea behind Hod Assaf Industries and Baran Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.