Correlation Between Shapir Engineering and Baran

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

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

Diversification Opportunities for Shapir Engineering and Baran

0.96

Correlation Coefficient

Shapir Engineering  Baran

Almost no diversification

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

Pair Corralation between Shapir Engineering and Baran

Assuming the 90 days trading horizon Shapir Engineering Industry is expected to generate 0.95 times more return on investment than Baran. However, Shapir Engineering Industry is 1.05 times less risky than Baran. It trades about 0.25 of its potential returns per unit of risk. Baran Group is currently generating about 0.23 per unit of risk. If you would invest  214,000  in Shapir Engineering Industry on September 28, 2024 and sell it today you would earn a total of  62,800  from holding Shapir Engineering Industry or generate 29.35% return on investment over 90 days.

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

Shapir Engineering Industry  vs.  Baran Group

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.

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.

Pair Trading with Shapir Engineering and Baran

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

The idea behind Shapir Engineering Industry and Baran 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.