Correlation Between Bet Shemesh and IMCO Industries

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

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

Diversification Opportunities for Bet Shemesh and IMCO Industries

0.8

Correlation Coefficient

Bet Shemesh  IMCO Industries

Very poor diversification

The 3 months correlation between Bet and IMCO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bet Shemesh Engines and IMCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMCO Industries and Bet Shemesh 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 Bet Shemesh Engines are associated (or correlated) with IMCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMCO Industries has no effect on the direction of Bet Shemesh i.e., Bet Shemesh and IMCO Industries go up and down completely randomly.

Pair Corralation between Bet Shemesh and IMCO Industries

Assuming the 90 days trading horizon Bet Shemesh is expected to generate 1.03 times less return on investment than IMCO Industries. In addition to that, Bet Shemesh is 1.44 times more volatile than IMCO Industries. It trades about 0.1 of its total potential returns per unit of risk. IMCO Industries is currently generating about 0.14 per unit of volatility. If you would invest  299,000  in IMCO Industries on September 27, 2024 and sell it today you would earn a total of  43,300  from holding IMCO Industries or generate 14.48% return on investment over 90 days.

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

Bet Shemesh Engines  vs.  IMCO Industries

Bet Shemesh Engines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bet Shemesh Engines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bet Shemesh sustained solid returns over the last few months and may actually be approaching a breakup point.

IMCO Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IMCO Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IMCO Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bet Shemesh and IMCO Industries

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

The idea behind Bet Shemesh Engines and IMCO Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.