Correlation Between Hod Assaf and Averbuch Formica

Can any of the company-specific risk be diversified away by investing in both Hod Assaf and Averbuch Formica 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 Averbuch Formica 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 Averbuch Formica Center, you can compare the effects of market volatilities on Hod Assaf and Averbuch Formica 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 Averbuch Formica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hod Assaf and Averbuch Formica.

Diversification Opportunities for Hod Assaf and Averbuch Formica

-0.61

Correlation Coefficient

Hod Assaf  Averbuch Formica

Excellent diversification

The 3 months correlation between Hod and Averbuch is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hod Assaf Industries and Averbuch Formica Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Averbuch Formica Center 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 Averbuch Formica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Averbuch Formica Center has no effect on the direction of Hod Assaf i.e., Hod Assaf and Averbuch Formica go up and down completely randomly.

Pair Corralation between Hod Assaf and Averbuch Formica

Assuming the 90 days trading horizon Hod Assaf Industries is expected to generate 0.92 times more return on investment than Averbuch Formica. However, Hod Assaf Industries is 1.08 times less risky than Averbuch Formica. It trades about 0.05 of its potential returns per unit of risk. Averbuch Formica Center is currently generating about -0.01 per unit of risk. If you would invest  382,100  in Hod Assaf Industries on February 1, 2024 and sell it today you would earn a total of  14,000  from holding Hod Assaf Industries or generate 3.66% return on investment over 90 days.

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

Hod Assaf Industries  vs.  Averbuch Formica Center

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.

Averbuch Formica Center

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hod Assaf and Averbuch Formica

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

The idea behind Hod Assaf Industries and Averbuch Formica Center 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.