Correlation Between El Al and Space
Can any of the company-specific risk be diversified away by investing in both El Al and Space 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 Space 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 Space Com, you can compare the effects of market volatilities on El Al and Space 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 Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Al and Space.
Diversification Opportunities for El Al and Space
Poor diversification
The 3 months correlation between ELAL and Space is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding El Al Israel and Space Com in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Com 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 Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Com has no effect on the direction of El Al i.e., El Al and Space go up and down completely randomly.
Pair Corralation between El Al and Space
Assuming the 90 days trading horizon El Al Israel is expected to generate 0.92 times more return on investment than Space. However, El Al Israel is 1.09 times less risky than Space. It trades about -0.07 of its potential returns per unit of risk. Space Com is currently generating about -0.2 per unit of risk. If you would invest 71,790 in El Al Israel on August 31, 2024 and sell it today you would lose (4,790) from holding El Al Israel or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
El Al Israel vs. Space Com
Performance |
| Timeline |
| El Al Israel |
| Space Com |
El Al and Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Al and Space
The main advantage of trading using opposite El Al and Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Al position performs unexpectedly, Space 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 Space will offset losses from the drop in Space's long position.| El Al vs. Delek Group | El Al vs. Teva Pharmaceutical Industries | El Al vs. Fattal 1998 Holdings | El Al vs. Bank Leumi Le Israel |
| Space vs. Bezeq Israeli Telecommunication | Space vs. Tower Semiconductor | Space vs. El Al Israel | Space vs. Kamada |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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