Correlation Between Electra Co and Migdal Insurance
Can any of the company-specific risk be diversified away by investing in both Electra Co and Migdal Insurance 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 Electra Co and Migdal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electra Co Pr and Migdal Insurance, you can compare the effects of market volatilities on Electra Co and Migdal Insurance 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 Electra Co with a short position of Migdal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra Co and Migdal Insurance.
Diversification Opportunities for Electra Co and Migdal Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Electra and Migdal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Electra Co Pr and Migdal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Migdal Insurance and Electra Co 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 Electra Co Pr are associated (or correlated) with Migdal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Migdal Insurance has no effect on the direction of Electra Co i.e., Electra Co and Migdal Insurance go up and down completely randomly.
Pair Corralation between Electra Co and Migdal Insurance
Assuming the 90 days trading horizon Electra Co Pr is expected to generate 1.86 times more return on investment than Migdal Insurance. However, Electra Co is 1.86 times more volatile than Migdal Insurance. It trades about 0.41 of its potential returns per unit of risk. Migdal Insurance is currently generating about 0.49 per unit of risk. If you would invest 704,000 in Electra Co Pr on September 13, 2024 and sell it today you would earn a total of 346,000 from holding Electra Co Pr or generate 49.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electra Co Pr vs. Migdal Insurance
Performance |
| Timeline |
| Electra Co Pr |
| Migdal Insurance |
Electra Co and Migdal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra Co and Migdal Insurance
The main advantage of trading using opposite Electra Co and Migdal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra Co position performs unexpectedly, Migdal Insurance 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 Migdal Insurance will offset losses from the drop in Migdal Insurance's long position.The idea behind Electra Co Pr and Migdal Insurance 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.| Migdal Insurance vs. Bank Hapoalim | Migdal Insurance vs. Israel Discount Bank | Migdal Insurance vs. Mizrahi Tefahot | Migdal Insurance vs. Bezeq Israeli Telecommunication |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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