Correlation Between Michman Basad and Nawi Brothers

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

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

Diversification Opportunities for Michman Basad and Nawi Brothers

0.96

Correlation Coefficient

Michman Basad  Nawi Brothers

Almost no diversification

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

Pair Corralation between Michman Basad and Nawi Brothers

Assuming the 90 days trading horizon Michman Basad is expected to generate 0.85 times more return on investment than Nawi Brothers. However, Michman Basad is 1.18 times less risky than Nawi Brothers. It trades about 0.65 of its potential returns per unit of risk. Nawi Brothers Group is currently generating about 0.49 per unit of risk. If you would invest  1,630,000  in Michman Basad on September 14, 2024 and sell it today you would earn a total of  851,000  from holding Michman Basad or generate 52.21% return on investment over 90 days.

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

Michman Basad  vs.  Nawi Brothers Group

Michman Basad

Risk-Adjusted Performance

50 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Michman Basad are ranked lower than 50 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Michman Basad sustained solid returns over the last few months and may actually be approaching a breakup point.

Nawi Brothers Group

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nawi Brothers Group are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nawi Brothers sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Michman Basad and Nawi Brothers

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

The idea behind Michman Basad and Nawi Brothers 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.