Correlation Between Arad Investment and Alrov Properties

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

By analyzing existing cross correlation between Arad Investment Industrial and Alrov Properties Lodgings, you can compare the effects of market volatilities on Arad Investment and Alrov Properties 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 Arad Investment with a short position of Alrov Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad Investment and Alrov Properties.

Diversification Opportunities for Arad Investment and Alrov Properties

-0.4

Correlation Coefficient

Arad Investment  Alrov Properties

Very good diversification

The 3 months correlation between Arad and Alrov is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and Alrov Properties Lodgings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alrov Properties Lodgings and Arad Investment 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 Arad Investment Industrial are associated (or correlated) with Alrov Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alrov Properties Lodgings has no effect on the direction of Arad Investment i.e., Arad Investment and Alrov Properties go up and down completely randomly.

Pair Corralation between Arad Investment and Alrov Properties

Assuming the 90 days trading horizon Arad Investment Industrial is expected to under-perform the Alrov Properties. But the stock apears to be less risky and, when comparing its historical volatility, Arad Investment Industrial is 1.26 times less risky than Alrov Properties. The stock trades about -0.13 of its potential returns per unit of risk. The Alrov Properties Lodgings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,488,000  in Alrov Properties Lodgings on February 7, 2024 and sell it today you would earn a total of  57,000  from holding Alrov Properties Lodgings or generate 3.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Arad Investment Industrial  vs.  Alrov Properties Lodgings

Arad Investment Indu

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arad Investment Industrial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arad Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Alrov Properties Lodgings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alrov Properties Lodgings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alrov Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arad Investment and Alrov Properties

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

The idea behind Arad Investment Industrial and Alrov Properties Lodgings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.