Correlation Between Israel Discount and Aerodrome
Can any of the company-specific risk be diversified away by investing in both Israel Discount and Aerodrome 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 Israel Discount and Aerodrome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Israel Discount Bank and Aerodrome Group, you can compare the effects of market volatilities on Israel Discount and Aerodrome 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 Israel Discount with a short position of Aerodrome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and Aerodrome.
Diversification Opportunities for Israel Discount and Aerodrome
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Israel and Aerodrome is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and Israel Discount 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 Israel Discount Bank are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of Israel Discount i.e., Israel Discount and Aerodrome go up and down completely randomly.
Pair Corralation between Israel Discount and Aerodrome
Assuming the 90 days trading horizon Israel Discount is expected to generate 6.1 times less return on investment than Aerodrome. But when comparing it to its historical volatility, Israel Discount Bank is 11.29 times less risky than Aerodrome. It trades about 0.39 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,580 in Aerodrome Group on August 25, 2024 and sell it today you would earn a total of 4,520 from holding Aerodrome Group or generate 126.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Israel Discount Bank vs. Aerodrome Group
Performance |
| Timeline |
| Israel Discount Bank |
| Aerodrome Group |
Israel Discount and Aerodrome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Israel Discount and Aerodrome
The main advantage of trading using opposite Israel Discount and Aerodrome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Discount position performs unexpectedly, Aerodrome 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 Aerodrome will offset losses from the drop in Aerodrome's long position.| Israel Discount vs. Bank Hapoalim | Israel Discount vs. Mizrahi Tefahot | Israel Discount vs. Bezeq Israeli Telecommunication | Israel Discount vs. Elbit Systems |
| Aerodrome vs. Hiron Trade Investments Industrial | Aerodrome vs. Analyst IMS Investment | Aerodrome vs. GODM Investments | Aerodrome vs. Libra Insurance |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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