Correlation Between Salomon A and Africa Israel

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

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

Diversification Opportunities for Salomon A and Africa Israel

-0.63

Correlation Coefficient

Salomon A  Africa Israel

Excellent diversification

The 3 months correlation between Salomon and Africa is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Salomon A Angel and Africa Israel Residences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Israel Residences and Salomon A 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 Salomon A Angel are associated (or correlated) with Africa Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Israel Residences has no effect on the direction of Salomon A i.e., Salomon A and Africa Israel go up and down completely randomly.

Pair Corralation between Salomon A and Africa Israel

Assuming the 90 days trading horizon Salomon A Angel is expected to generate 0.66 times more return on investment than Africa Israel. However, Salomon A Angel is 1.51 times less risky than Africa Israel. It trades about -0.16 of its potential returns per unit of risk. Africa Israel Residences is currently generating about -0.11 per unit of risk. If you would invest  399,800  in Salomon A Angel on February 1, 2024 and sell it today you would lose (19,900) from holding Salomon A Angel or give up 4.98% of portfolio value over 90 days.

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

Salomon A Angel  vs.  Africa Israel Residences

Salomon A Angel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salomon A Angel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Africa Israel Residences

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Israel Residences are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Africa Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salomon A and Africa Israel

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

The idea behind Salomon A Angel and Africa Israel Residences 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.