Correlation Between RSL Electronics and Israel Discount
Can any of the company-specific risk be diversified away by investing in both RSL Electronics and Israel Discount 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 RSL Electronics and Israel Discount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RSL Electronics and Israel Discount Bank, you can compare the effects of market volatilities on RSL Electronics and Israel Discount 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 RSL Electronics with a short position of Israel Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of RSL Electronics and Israel Discount.
Diversification Opportunities for RSL Electronics and Israel Discount
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RSL and Israel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding RSL Electronics and Israel Discount Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Discount Bank and RSL Electronics 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 RSL Electronics are associated (or correlated) with Israel Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Discount Bank has no effect on the direction of RSL Electronics i.e., RSL Electronics and Israel Discount go up and down completely randomly.
Pair Corralation between RSL Electronics and Israel Discount
Assuming the 90 days trading horizon RSL Electronics is expected to generate 1.68 times more return on investment than Israel Discount. However, RSL Electronics is 1.68 times more volatile than Israel Discount Bank. It trades about 0.29 of its potential returns per unit of risk. Israel Discount Bank is currently generating about 0.24 per unit of risk. If you would invest 70,000 in RSL Electronics on September 13, 2024 and sell it today you would earn a total of 11,250 from holding RSL Electronics or generate 16.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RSL Electronics vs. Israel Discount Bank
Performance |
| Timeline |
| RSL Electronics |
| Israel Discount Bank |
RSL Electronics and Israel Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RSL Electronics and Israel Discount
The main advantage of trading using opposite RSL Electronics and Israel Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RSL Electronics position performs unexpectedly, Israel Discount 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 Israel Discount will offset losses from the drop in Israel Discount's long position.| RSL Electronics vs. Aran Research and | RSL Electronics vs. Al Bad Massuot Yitzhak | RSL Electronics vs. Analyst IMS Investment | RSL Electronics vs. Golan Plastic |
| Israel Discount vs. Bank Leumi Le Israel | Israel Discount vs. Bank Hapoalim | Israel Discount vs. Mizrahi Tefahot | Israel Discount vs. Bezeq Israeli Telecommunication |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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