Correlation Between Ayalon Holdings and AudioCodes

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

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

Diversification Opportunities for Ayalon Holdings and AudioCodes

-0.68

Correlation Coefficient

Ayalon Holdings  AudioCodes

Excellent diversification

The 3 months correlation between Ayalon and AudioCodes is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ayalon Holdings and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes and Ayalon Holdings 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 Ayalon Holdings are associated (or correlated) with AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Ayalon Holdings i.e., Ayalon Holdings and AudioCodes go up and down completely randomly.

Pair Corralation between Ayalon Holdings and AudioCodes

Assuming the 90 days trading horizon Ayalon Holdings is expected to generate 0.73 times more return on investment than AudioCodes. However, Ayalon Holdings is 1.36 times less risky than AudioCodes. It trades about 0.53 of its potential returns per unit of risk. AudioCodes is currently generating about -0.05 per unit of risk. If you would invest  189,816  in Ayalon Holdings on September 16, 2024 and sell it today you would earn a total of  130,184  from holding Ayalon Holdings or generate 68.58% return on investment over 90 days.

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

Ayalon Holdings  vs.  AudioCodes

Ayalon Holdings

Risk-Adjusted Performance

42 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Ayalon Holdings are ranked lower than 42 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ayalon Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

AudioCodes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AudioCodes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ayalon Holdings and AudioCodes

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

The idea behind Ayalon Holdings and AudioCodes 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 Valuation module to check real value of public entities based on technical and fundamental data.