Correlation Between Brack Capit and Arad Investment

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

By analyzing existing cross correlation between Brack Capit N and Arad Investment Industrial, you can compare the effects of market volatilities on Brack Capit and Arad Investment 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 Brack Capit with a short position of Arad Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brack Capit and Arad Investment.

Diversification Opportunities for Brack Capit and Arad Investment

-0.24

Correlation Coefficient

Brack Capit  Arad Investment

Very good diversification

The 3 months correlation between Brack and Arad is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Brack Capit N and Arad Investment Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad Investment Indu and Brack Capit 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 Brack Capit N are associated (or correlated) with Arad Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad Investment Indu has no effect on the direction of Brack Capit i.e., Brack Capit and Arad Investment go up and down completely randomly.

Pair Corralation between Brack Capit and Arad Investment

Assuming the 90 days trading horizon Brack Capit is expected to generate 102.81 times less return on investment than Arad Investment. But when comparing it to its historical volatility, Brack Capit N is 4.67 times less risky than Arad Investment. It trades about 0.02 of its potential returns per unit of risk. Arad Investment Industrial is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  825,900  in Arad Investment Industrial on September 17, 2024 and sell it today you would earn a total of  804,100  from holding Arad Investment Industrial or generate 97.36% return on investment over 90 days.

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

Brack Capit N  vs.  Arad Investment Industrial

Brack Capit N

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brack Capit N are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brack Capit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arad Investment Indu

Risk-Adjusted Performance

39 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Arad Investment Industrial are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arad Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brack Capit and Arad Investment

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

The idea behind Brack Capit N and Arad Investment Industrial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.