Correlation Between Kafrit and Ralco Agencies
Can any of the company-specific risk be diversified away by investing in both Kafrit and Ralco Agencies 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 Kafrit and Ralco Agencies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kafrit and Ralco Agencies, you can compare the effects of market volatilities on Kafrit and Ralco Agencies 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 Kafrit with a short position of Ralco Agencies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kafrit and Ralco Agencies.
Diversification Opportunities for Kafrit and Ralco Agencies
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kafrit and Ralco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kafrit and Ralco Agencies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralco Agencies and Kafrit 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 Kafrit are associated (or correlated) with Ralco Agencies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralco Agencies has no effect on the direction of Kafrit i.e., Kafrit and Ralco Agencies go up and down completely randomly.
Pair Corralation between Kafrit and Ralco Agencies
Assuming the 90 days trading horizon Kafrit is expected to under-perform the Ralco Agencies. But the stock apears to be less risky and, when comparing its historical volatility, Kafrit is 1.16 times less risky than Ralco Agencies. The stock trades about -0.21 of its potential returns per unit of risk. The Ralco Agencies is currently generating about 0.69 of returns per unit of risk over similar time horizon. If you would invest 393,500 in Ralco Agencies on September 13, 2024 and sell it today you would earn a total of 108,300 from holding Ralco Agencies or generate 27.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kafrit vs. Ralco Agencies
Performance |
| Timeline |
| Kafrit |
| Ralco Agencies |
Kafrit and Ralco Agencies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kafrit and Ralco Agencies
The main advantage of trading using opposite Kafrit and Ralco Agencies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kafrit position performs unexpectedly, Ralco Agencies 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 Ralco Agencies will offset losses from the drop in Ralco Agencies' long position.The idea behind Kafrit and Ralco Agencies 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.| Ralco Agencies vs. Migdal Insurance | Ralco Agencies vs. Clal Insurance Enterprises | Ralco Agencies vs. Bank Leumi Le Israel | Ralco Agencies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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