Correlation Between Israel Canada and IES Holdings
Can any of the company-specific risk be diversified away by investing in both Israel Canada and IES Holdings 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 Israel Canada and IES Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Israel Canada and IES Holdings, you can compare the effects of market volatilities on Israel Canada and IES Holdings 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 Israel Canada with a short position of IES Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Canada and IES Holdings.
Diversification Opportunities for Israel Canada and IES Holdings
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Israel and IES is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Israel Canada and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and Israel Canada 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 Israel Canada are associated (or correlated) with IES Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IES Holdings has no effect on the direction of Israel Canada i.e., Israel Canada and IES Holdings go up and down completely randomly.
Pair Corralation between Israel Canada and IES Holdings
Assuming the 90 days trading horizon Israel Canada is expected to generate 1.56 times less return on investment than IES Holdings. But when comparing it to its historical volatility, Israel Canada is 1.09 times less risky than IES Holdings. It trades about 0.45 of its potential returns per unit of risk. IES Holdings is currently generating about 0.65 of returns per unit of risk over similar time horizon. If you would invest 1,958,000 in IES Holdings on August 29, 2024 and sell it today you would earn a total of 403,000 from holding IES Holdings or generate 20.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Israel Canada vs. IES Holdings
Performance |
| Timeline |
| Israel Canada |
| IES Holdings |
Israel Canada and IES Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Israel Canada and IES Holdings
The main advantage of trading using opposite Israel Canada and IES Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Canada position performs unexpectedly, IES Holdings 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 IES Holdings will offset losses from the drop in IES Holdings' long position.The idea behind Israel Canada and IES Holdings 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.| IES Holdings vs. Israel Canada | IES Holdings vs. Delek Group | IES Holdings vs. Shikun Binui | IES Holdings vs. Israel Discount Bank |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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