Correlation Between El Al and Equital
Can any of the company-specific risk be diversified away by investing in both El Al and Equital 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 El Al and Equital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Al Israel and Equital, you can compare the effects of market volatilities on El Al and Equital 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 El Al with a short position of Equital. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Al and Equital.
Diversification Opportunities for El Al and Equital
Poor diversification
The 3 months correlation between ELAL and Equital is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding El Al Israel and Equital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equital and El Al 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 El Al Israel are associated (or correlated) with Equital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equital has no effect on the direction of El Al i.e., El Al and Equital go up and down completely randomly.
Pair Corralation between El Al and Equital
Assuming the 90 days trading horizon El Al Israel is expected to under-perform the Equital. In addition to that, El Al is 2.0 times more volatile than Equital. It trades about -0.07 of its total potential returns per unit of risk. Equital is currently generating about 0.33 per unit of volatility. If you would invest 1,251,000 in Equital on September 13, 2024 and sell it today you would earn a total of 284,000 from holding Equital or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Al Israel vs. Equital
Performance |
| Timeline |
| El Al Israel |
| Equital |
El Al and Equital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Al and Equital
The main advantage of trading using opposite El Al and Equital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Al position performs unexpectedly, Equital 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 Equital will offset losses from the drop in Equital's long position.| El Al vs. Aran Research and | El Al vs. Al Bad Massuot Yitzhak | El Al vs. Analyst IMS Investment | El Al vs. Golan Plastic |
| Equital vs. Fattal 1998 Holdings | Equital vs. El Al Israel | Equital vs. Bank Leumi Le Israel | Equital vs. Teva Pharmaceutical Industries |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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