Correlation Between Sarfati and Shikun Binui

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

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

Diversification Opportunities for Sarfati and Shikun Binui

0.96

Correlation Coefficient

Sarfati  Shikun Binui

Almost no diversification

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

Pair Corralation between Sarfati and Shikun Binui

Assuming the 90 days trading horizon Sarfati is expected to generate 1.68 times less return on investment than Shikun Binui. But when comparing it to its historical volatility, Sarfati is 1.65 times less risky than Shikun Binui. It trades about 0.21 of its potential returns per unit of risk. Shikun Binui is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  75,790  in Shikun Binui on September 29, 2024 and sell it today you would earn a total of  56,710  from holding Shikun Binui or generate 74.83% return on investment over 90 days.

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

Sarfati  vs.  Shikun Binui

Sarfati

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sarfati are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sarfati sustained solid returns over the last few months and may actually be approaching a breakup point.

Shikun Binui

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shikun Binui are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shikun Binui sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarfati and Shikun Binui

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

The idea behind Sarfati and Shikun Binui 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.