Correlation Between Aura Investments and RSL Electronics
Can any of the company-specific risk be diversified away by investing in both Aura Investments and RSL Electronics 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 Aura Investments and RSL Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aura Investments and RSL Electronics, you can compare the effects of market volatilities on Aura Investments and RSL Electronics 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 Aura Investments with a short position of RSL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aura Investments and RSL Electronics.
Diversification Opportunities for Aura Investments and RSL Electronics
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aura and RSL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aura Investments and RSL Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RSL Electronics and Aura Investments 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 Aura Investments are associated (or correlated) with RSL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RSL Electronics has no effect on the direction of Aura Investments i.e., Aura Investments and RSL Electronics go up and down completely randomly.
Pair Corralation between Aura Investments and RSL Electronics
Assuming the 90 days trading horizon Aura Investments is expected to generate 0.92 times more return on investment than RSL Electronics. However, Aura Investments is 1.09 times less risky than RSL Electronics. It trades about 0.45 of its potential returns per unit of risk. RSL Electronics is currently generating about 0.3 per unit of risk. If you would invest 187,900 in Aura Investments on September 25, 2024 and sell it today you would earn a total of 32,100 from holding Aura Investments or generate 17.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 94.44% |
Values | Daily Returns |
Aura Investments vs. RSL Electronics
Performance |
Timeline |
Aura Investments |
RSL Electronics |
Aura Investments and RSL Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aura Investments and RSL Electronics
The main advantage of trading using opposite Aura Investments and RSL Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aura Investments position performs unexpectedly, RSL Electronics 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 RSL Electronics will offset losses from the drop in RSL Electronics' long position.Aura Investments vs. Azrieli Group | Aura Investments vs. Delek Group | Aura Investments vs. Shikun Binui | Aura Investments vs. Israel Discount Bank |
RSL Electronics vs. Ashtrom Group | RSL Electronics vs. Aura Investments | RSL Electronics vs. Shapir Engineering Industry |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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