Correlation Between Ayalon Holdings and Neto Malinda

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

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

Diversification Opportunities for Ayalon Holdings and Neto Malinda

0.97

Correlation Coefficient

Ayalon Holdings  Neto Malinda

Almost no diversification

The 3 months correlation between Ayalon and Neto is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ayalon Holdings and Neto Malinda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neto Malinda 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 Neto Malinda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neto Malinda has no effect on the direction of Ayalon Holdings i.e., Ayalon Holdings and Neto Malinda go up and down completely randomly.

Pair Corralation between Ayalon Holdings and Neto Malinda

Assuming the 90 days trading horizon Ayalon Holdings is expected to generate 0.7 times more return on investment than Neto Malinda. However, Ayalon Holdings is 1.44 times less risky than Neto Malinda. It trades about 0.87 of its potential returns per unit of risk. Neto Malinda is currently generating about 0.23 per unit of risk. If you would invest  261,449  in Ayalon Holdings on September 25, 2024 and sell it today you would earn a total of  68,551  from holding Ayalon Holdings or generate 26.22% return on investment over 90 days.

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

Ayalon Holdings  vs.  Neto Malinda

Ayalon Holdings

Risk-Adjusted Performance

44 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Ayalon Holdings are ranked lower than 44 (%) 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.

Neto Malinda

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Neto Malinda are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Neto Malinda sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ayalon Holdings and Neto Malinda

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

The idea behind Ayalon Holdings and Neto Malinda 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.