Correlation Between Israel Discount and Nissan
Can any of the company-specific risk be diversified away by investing in both Israel Discount and Nissan 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 Nissan 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 Nissan, you can compare the effects of market volatilities on Israel Discount and Nissan 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 Nissan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and Nissan.
Diversification Opportunities for Israel Discount and Nissan
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Israel and Nissan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Nissan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan 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 Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan has no effect on the direction of Israel Discount i.e., Israel Discount and Nissan go up and down completely randomly.
Pair Corralation between Israel Discount and Nissan
Assuming the 90 days trading horizon Israel Discount is expected to generate 1.84 times less return on investment than Nissan. But when comparing it to its historical volatility, Israel Discount Bank is 1.31 times less risky than Nissan. It trades about 0.05 of its potential returns per unit of risk. Nissan is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 77,200 in Nissan on September 5, 2024 and sell it today you would earn a total of 66,300 from holding Nissan or generate 85.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Israel Discount Bank vs. Nissan
Performance |
| Timeline |
| Israel Discount Bank |
| Nissan |
Israel Discount and Nissan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Israel Discount and Nissan
The main advantage of trading using opposite Israel Discount and Nissan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Discount position performs unexpectedly, Nissan 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 Nissan will offset losses from the drop in Nissan's long position.| Israel Discount vs. Bank Leumi Le Israel | Israel Discount vs. Bank Hapoalim | Israel Discount vs. Mizrahi Tefahot | Israel Discount vs. Bezeq Israeli Telecommunication |
| Nissan vs. Shagrir Group Vehicle | Nissan vs. Retailors | Nissan vs. Polyram Plastic Industries | Nissan vs. Israel Discount Bank |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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