Correlation Between Avrot Industries and EN Shoham

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

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

Diversification Opportunities for Avrot Industries and EN Shoham

0.16

Correlation Coefficient

Avrot Industries  EN Shoham

Average diversification

The 3 months correlation between Avrot and SHOM is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Avrot Industries 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 Avrot Industries 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 Avrot Industries 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 Avrot Industries i.e., Avrot Industries and EN Shoham go up and down completely randomly.

Pair Corralation between Avrot Industries and EN Shoham

Assuming the 90 days trading horizon Avrot Industries is expected to under-perform the EN Shoham. In addition to that, Avrot Industries is 1.34 times more volatile than EN Shoham Business. It trades about -0.08 of its total potential returns per unit of risk. EN Shoham Business is currently generating about -0.04 per unit of volatility. If you would invest  52,852  in EN Shoham Business on January 31, 2024 and sell it today you would lose (752.00) from holding EN Shoham Business or give up 1.42% of portfolio value over 90 days.

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

Avrot Industries  vs.  EN Shoham Business

Avrot Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avrot Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avrot Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

EN Shoham Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EN Shoham Business has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EN Shoham is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avrot Industries and EN Shoham

The main advantage of trading using opposite Avrot Industries and EN Shoham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avrot Industries 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 Avrot Industries 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.