Correlation Between Migdal Insurance and Prime Energy
Can any of the company-specific risk be diversified away by investing in both Migdal Insurance and Prime Energy 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 Migdal Insurance and Prime Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Migdal Insurance and Prime Energy PE, you can compare the effects of market volatilities on Migdal Insurance and Prime Energy 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 Migdal Insurance with a short position of Prime Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Migdal Insurance and Prime Energy.
Diversification Opportunities for Migdal Insurance and Prime Energy
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Migdal and Prime is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Migdal Insurance and Prime Energy PE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Energy PE and Migdal Insurance 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 Migdal Insurance are associated (or correlated) with Prime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Energy PE has no effect on the direction of Migdal Insurance i.e., Migdal Insurance and Prime Energy go up and down completely randomly.
Pair Corralation between Migdal Insurance and Prime Energy
Assuming the 90 days trading horizon Migdal Insurance is expected to generate 1.32 times less return on investment than Prime Energy. But when comparing it to its historical volatility, Migdal Insurance is 3.03 times less risky than Prime Energy. It trades about 0.34 of its potential returns per unit of risk. Prime Energy PE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 60,500 in Prime Energy PE on August 26, 2024 and sell it today you would earn a total of 6,560 from holding Prime Energy PE or generate 10.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Migdal Insurance vs. Prime Energy PE
Performance |
| Timeline |
| Migdal Insurance |
| Prime Energy PE |
Migdal Insurance and Prime Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Migdal Insurance and Prime Energy
The main advantage of trading using opposite Migdal Insurance and Prime Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Migdal Insurance position performs unexpectedly, Prime Energy 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 Prime Energy will offset losses from the drop in Prime Energy's long position.| Migdal Insurance vs. Bank Hapoalim | Migdal Insurance vs. Israel Discount Bank | Migdal Insurance vs. Mizrahi Tefahot | Migdal Insurance vs. Bezeq Israeli Telecommunication |
| Prime Energy vs. Enlight Renewable Energy | Prime Energy vs. Energix Renewable Energies | Prime Energy vs. Brainsway | Prime Energy vs. Mivne Real Estate |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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