Correlation Between Automatic Bank and Tadiran Hldg

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

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

Diversification Opportunities for Automatic Bank and Tadiran Hldg

-0.22

Correlation Coefficient

Automatic Bank  Tadiran Hldg

Very good diversification

The 3 months correlation between Automatic and Tadiran is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Bank Services and Tadiran Hldg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tadiran Hldg and Automatic Bank 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 Automatic Bank Services are associated (or correlated) with Tadiran Hldg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tadiran Hldg has no effect on the direction of Automatic Bank i.e., Automatic Bank and Tadiran Hldg go up and down completely randomly.

Pair Corralation between Automatic Bank and Tadiran Hldg

Assuming the 90 days trading horizon Automatic Bank Services is expected to generate 0.74 times more return on investment than Tadiran Hldg. However, Automatic Bank Services is 1.35 times less risky than Tadiran Hldg. It trades about 0.01 of its potential returns per unit of risk. Tadiran Hldg is currently generating about -0.04 per unit of risk. If you would invest  145,813  in Automatic Bank Services on February 1, 2024 and sell it today you would lose (6,713) from holding Automatic Bank Services or give up 4.6% of portfolio value over 90 days.

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

Automatic Bank Services  vs.  Tadiran Hldg

Automatic Bank Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automatic Bank Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Tadiran Hldg

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Tadiran Hldg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Tadiran Hldg may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Automatic Bank and Tadiran Hldg

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

The idea behind Automatic Bank Services and Tadiran Hldg 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.