Correlation Between Israel Discount and Main Street
Can any of the company-specific risk be diversified away by investing in both Israel Discount and Main Street 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 Discount and Main Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Israel Discount Bank and Main Street Financial, you can compare the effects of market volatilities on Israel Discount and Main Street 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 Discount with a short position of Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and Main Street.
Diversification Opportunities for Israel Discount and Main Street
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Israel and Main is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial and Israel Discount 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 Discount Bank are associated (or correlated) with Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of Israel Discount i.e., Israel Discount and Main Street go up and down completely randomly.
Pair Corralation between Israel Discount and Main Street
Assuming the 90 days horizon Israel Discount Bank is expected to generate 1.35 times more return on investment than Main Street. However, Israel Discount is 1.35 times more volatile than Main Street Financial. It trades about 0.05 of its potential returns per unit of risk. Main Street Financial is currently generating about -0.01 per unit of risk. If you would invest 4,959 in Israel Discount Bank on September 1, 2024 and sell it today you would earn a total of 860.00 from holding Israel Discount Bank or generate 17.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 78.72% |
| Values | Daily Returns |
Israel Discount Bank vs. Main Street Financial
Performance |
| Timeline |
| Israel Discount Bank |
| Main Street Financial |
Israel Discount and Main Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Israel Discount and Main Street
The main advantage of trading using opposite Israel Discount and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Discount position performs unexpectedly, Main Street 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 Main Street will offset losses from the drop in Main Street's long position.| Israel Discount vs. Piraeus Bank SA | Israel Discount vs. Turkiye Garanti Bankasi | Israel Discount vs. Delhi Bank Corp | Israel Discount vs. Uwharrie Capital Corp |
| Main Street vs. CCFNB Bancorp | Main Street vs. Burke Herbert Financial | Main Street vs. First IC | Main Street vs. Enterprise Financial Services |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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