Correlation Between First International and Aerodrome
Can any of the company-specific risk be diversified away by investing in both First International and Aerodrome 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 First International and Aerodrome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First International Bank and Aerodrome Group, you can compare the effects of market volatilities on First International and Aerodrome 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 First International with a short position of Aerodrome. Check out your portfolio center. Please also check ongoing floating volatility patterns of First International and Aerodrome.
Diversification Opportunities for First International and Aerodrome
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Aerodrome is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First International Bank and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and First International 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 First International Bank are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of First International i.e., First International and Aerodrome go up and down completely randomly.
Pair Corralation between First International and Aerodrome
Assuming the 90 days trading horizon First International is expected to generate 8.52 times less return on investment than Aerodrome. But when comparing it to its historical volatility, First International Bank is 14.18 times less risky than Aerodrome. It trades about 0.34 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,500 in Aerodrome Group on August 29, 2024 and sell it today you would earn a total of 4,100 from holding Aerodrome Group or generate 117.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First International Bank vs. Aerodrome Group
Performance |
| Timeline |
| First International Bank |
| Aerodrome Group |
First International and Aerodrome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First International and Aerodrome
The main advantage of trading using opposite First International and Aerodrome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First International position performs unexpectedly, Aerodrome 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 Aerodrome will offset losses from the drop in Aerodrome's long position.| First International vs. Elbit Systems | First International vs. Discount Investment Corp | First International vs. Clal Insurance Enterprises | First International vs. AudioCodes |
| Aerodrome vs. Bezeq Israeli Telecommunication | Aerodrome vs. Tower Semiconductor | Aerodrome vs. Israel Discount Bank | Aerodrome vs. Holmes Place International |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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