Correlation Between Netanel and EN Shoham
Can any of the company-specific risk be diversified away by investing in both Netanel and EN Shoham 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 Netanel and EN Shoham into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netanel Group and EN Shoham Business, you can compare the effects of market volatilities on Netanel and EN Shoham 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 Netanel with a short position of EN Shoham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netanel and EN Shoham.
Diversification Opportunities for Netanel and EN Shoham
Weak diversification
The 3 months correlation between Netanel and SHOM is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Netanel Group and EN Shoham Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EN Shoham Business and Netanel 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 Netanel Group are associated (or correlated) with EN Shoham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EN Shoham Business has no effect on the direction of Netanel i.e., Netanel and EN Shoham go up and down completely randomly.
Pair Corralation between Netanel and EN Shoham
Assuming the 90 days trading horizon Netanel Group is expected to generate 0.8 times more return on investment than EN Shoham. However, Netanel Group is 1.24 times less risky than EN Shoham. It trades about -0.07 of its potential returns per unit of risk. EN Shoham Business is currently generating about -0.16 per unit of risk. If you would invest 118,500 in Netanel Group on February 1, 2024 and sell it today you would lose (2,500) from holding Netanel Group or give up 2.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Netanel Group vs. EN Shoham Business
Performance |
Timeline |
Netanel Group |
EN Shoham Business |
Netanel and EN Shoham Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Netanel and EN Shoham
The main advantage of trading using opposite Netanel and EN Shoham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netanel position performs unexpectedly, EN Shoham 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 EN Shoham will offset losses from the drop in EN Shoham's long position.The idea behind Netanel Group and EN Shoham Business 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.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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