Correlation Between Ford and Israel Discount
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Israel Discount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Israel Discount Bank, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Israel Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Israel Discount.
Diversification Opportunities for Ford and Israel Discount
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Israel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Israel Discount go up and down completely randomly.
Pair Corralation between Ford and Israel Discount
Taking into account the 90-day investment horizon Ford is expected to generate 2.94 times less return on investment than Israel Discount. In addition to that, Ford is 1.17 times more volatile than Israel Discount Bank. It trades about 0.01 of its total potential returns per unit of risk. Israel Discount Bank is currently generating about 0.05 per unit of volatility. If you would invest 180,718 in Israel Discount Bank on August 28, 2024 and sell it today you would earn a total of 62,482 from holding Israel Discount Bank or generate 34.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 77.78% |
| Values | Daily Returns |
Ford Motor vs. Israel Discount Bank
Performance |
| Timeline |
| Ford Motor |
| Israel Discount Bank |
Ford and Israel Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Israel Discount
The main advantage of trading using opposite Ford and Israel Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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. Bank Leumi Le Israel | Israel Discount vs. Bank Hapoalim | Israel Discount vs. Mizrahi Tefahot | Israel Discount 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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