Can any of the company-specific risk be diversified away by investing in both Ituran Location and Harmonic 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 Ituran Location and Harmonic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ituran Location and and Harmonic, you can compare the effects of market volatilities on Ituran Location and Harmonic 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 Ituran Location with a short position of Harmonic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ituran Location and Harmonic.
Diversification Opportunities for Ituran Location and Harmonic
The 3 months correlation between Ituran and Harmonic is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ituran Location and and Harmonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmonic and Ituran Location 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 Ituran Location and are associated (or correlated) with Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmonic has no effect on the direction of Ituran Location i.e., Ituran Location and Harmonic go up and down completely randomly.
Pair Corralation between Ituran Location and Harmonic
Given the investment horizon of 90 days Ituran Location and is expected to generate 0.46 times more return on investment than Harmonic. However, Ituran Location and is 2.17 times less risky than Harmonic. It trades about -0.05 of its potential returns per unit of risk. Harmonic is currently generating about -0.04 per unit of risk. If you would invest 2,751 in Ituran Location and on March 6, 2024 and sell it today you would lose (116.00) from holding Ituran Location and or give up 4.22% of portfolio value over 90 days.
Over the last 90 days Ituran Location and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ituran Location is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Over the last 90 days Harmonic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Harmonic is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.