Correlation Between Elco and Israel Discount
Can any of the company-specific risk be diversified away by investing in both Elco and Israel Discount 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 Elco and Israel Discount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elco and Israel Discount Bank, you can compare the effects of market volatilities on Elco and Israel Discount 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 Elco with a short position of Israel Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elco and Israel Discount.
Diversification Opportunities for Elco and Israel Discount
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Elco and Israel is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Elco and Israel Discount Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Discount Bank and Elco 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 Elco are associated (or correlated) with Israel Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Discount Bank has no effect on the direction of Elco i.e., Elco and Israel Discount go up and down completely randomly.
Pair Corralation between Elco and Israel Discount
Assuming the 90 days trading horizon Elco is expected to generate 1.13 times more return on investment than Israel Discount. However, Elco is 1.13 times more volatile than Israel Discount Bank. It trades about 0.34 of its potential returns per unit of risk. Israel Discount Bank is currently generating about 0.34 per unit of risk. If you would invest 1,108,000 in Elco on August 30, 2024 and sell it today you would earn a total of 219,000 from holding Elco or generate 19.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elco vs. Israel Discount Bank
Performance |
| Timeline |
| Elco |
| Israel Discount Bank |
Elco and Israel Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elco and Israel Discount
The main advantage of trading using opposite Elco and Israel Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elco position performs unexpectedly, Israel Discount 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 Israel Discount will offset losses from the drop in Israel Discount's long position.The idea behind Elco and Israel Discount Bank 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.| Israel Discount vs. Elbit Systems | Israel Discount vs. Discount Investment Corp | Israel Discount vs. AudioCodes | Israel Discount vs. Shufersal |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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