Correlation Between Israel China and Arena Star

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

By analyzing existing cross correlation between Israel China Biotechnology and Arena Star Group, you can compare the effects of market volatilities on Israel China and Arena Star 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 Israel China with a short position of Arena Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel China and Arena Star.

Diversification Opportunities for Israel China and Arena Star

-0.1

Correlation Coefficient

Israel China  Arena Star

Good diversification

The 3 months correlation between Israel and Arena is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Israel China Biotechnology and Arena Star Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Star Group and Israel China 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 Israel China Biotechnology are associated (or correlated) with Arena Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Star Group has no effect on the direction of Israel China i.e., Israel China and Arena Star go up and down completely randomly.

Pair Corralation between Israel China and Arena Star

Assuming the 90 days trading horizon Israel China Biotechnology is expected to under-perform the Arena Star. In addition to that, Israel China is 2.27 times more volatile than Arena Star Group. It trades about -0.08 of its total potential returns per unit of risk. Arena Star Group is currently generating about 0.09 per unit of volatility. If you would invest  21,490  in Arena Star Group on September 26, 2024 and sell it today you would earn a total of  1,630  from holding Arena Star Group or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.83%
Values	Daily Returns

Israel China Biotechnology  vs.  Arena Star Group

Israel China Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Arena Star Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Star Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arena Star may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Israel China and Arena Star

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

The idea behind Israel China Biotechnology and Arena Star Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.