Correlation Between Al Bad and C Mer

Can any of the company-specific risk be diversified away by investing in both Al Bad and C Mer 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 Al Bad and C Mer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Al Bad Massuot Yitzhak and C Mer Industries, you can compare the effects of market volatilities on Al Bad and C Mer 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 Al Bad with a short position of C Mer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Bad and C Mer.

Diversification Opportunities for Al Bad and C Mer

0.86

Correlation Coefficient

Al Bad  C Mer

Very poor diversification

The 3 months correlation between ALBA and CMER is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Al Bad Massuot Yitzhak and C Mer Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Mer Industries and Al Bad 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 Al Bad Massuot Yitzhak are associated (or correlated) with C Mer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Mer Industries has no effect on the direction of Al Bad i.e., Al Bad and C Mer go up and down completely randomly.

Pair Corralation between Al Bad and C Mer

Assuming the 90 days trading horizon Al Bad Massuot Yitzhak is expected to under-perform the C Mer. But the stock apears to be less risky and, when comparing its historical volatility, Al Bad Massuot Yitzhak is 3.36 times less risky than C Mer. The stock trades about -0.36 of its potential returns per unit of risk. The C Mer Industries is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  227,100  in C Mer Industries on September 17, 2024 and sell it today you would earn a total of  38,900  from holding C Mer Industries or generate 17.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

Al Bad Massuot Yitzhak  vs.  C Mer Industries

Al Bad Massuot

Risk-Adjusted Performance

17 of 100

Solid

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

C Mer Industries

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in C Mer Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, C Mer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Bad and C Mer

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

The idea behind Al Bad Massuot Yitzhak and C Mer Industries 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.