Correlation Between Baran and Shapir Engineering

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

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

Diversification Opportunities for Baran and Shapir Engineering

0.96

Correlation Coefficient

Baran  Shapir Engineering

Almost no diversification

The 3 months correlation between Baran and Shapir is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Baran Group and Shapir Engineering Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shapir Engineering and Baran 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 Baran Group are associated (or correlated) with Shapir Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shapir Engineering has no effect on the direction of Baran i.e., Baran and Shapir Engineering go up and down completely randomly.

Pair Corralation between Baran and Shapir Engineering

Assuming the 90 days trading horizon Baran Group is expected to generate 1.52 times more return on investment than Shapir Engineering. However, Baran is 1.52 times more volatile than Shapir Engineering Industry. It trades about 0.1 of its potential returns per unit of risk. Shapir Engineering Industry is currently generating about 0.05 per unit of risk. If you would invest  140,912  in Baran Group on September 27, 2024 and sell it today you would earn a total of  6,688  from holding Baran Group or generate 4.75% return on investment over 90 days.

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

Baran Group  vs.  Shapir Engineering Industry

Baran Group

Risk-Adjusted Performance

17 of 100

Solid

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

Shapir Engineering

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shapir Engineering Industry are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shapir Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baran and Shapir Engineering

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

The idea behind Baran Group and Shapir Engineering Industry 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.