Correlation Between Photomyne and Arad

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

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

Diversification Opportunities for Photomyne and Arad

0.76

Correlation Coefficient

Photomyne  Arad

Poor diversification

The 3 months correlation between Photomyne and Arad is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Photomyne and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Photomyne 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 Photomyne are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Photomyne i.e., Photomyne and Arad go up and down completely randomly.

Pair Corralation between Photomyne and Arad

Assuming the 90 days trading horizon Photomyne is expected to generate 0.95 times more return on investment than Arad. However, Photomyne is 1.05 times less risky than Arad. It trades about 0.35 of its potential returns per unit of risk. Arad is currently generating about 0.12 per unit of risk. If you would invest  242,200  in Photomyne on September 15, 2024 and sell it today you would earn a total of  59,200  from holding Photomyne or generate 24.44% return on investment over 90 days.

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

Photomyne  vs.  Arad

Photomyne

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Photomyne are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Photomyne sustained solid returns over the last few months and may actually be approaching a breakup point.

Arad

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Arad may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Photomyne and Arad

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

The idea behind Photomyne and Arad 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.