Correlation Between Tel Aviv and Petrochemical
Can any of the company-specific risk be diversified away by investing in both Tel Aviv and Petrochemical 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 Tel Aviv and Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tel Aviv 35 and Petrochemical, you can compare the effects of market volatilities on Tel Aviv and Petrochemical 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 Tel Aviv with a short position of Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Petrochemical.
Diversification Opportunities for Tel Aviv and Petrochemical
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tel and Petrochemical is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and Tel Aviv 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 Tel Aviv 35 are associated (or correlated) with Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of Tel Aviv i.e., Tel Aviv and Petrochemical go up and down completely randomly.
Pair Corralation between Tel Aviv and Petrochemical
Assuming the 90 days trading horizon Tel Aviv is expected to generate 1.81 times less return on investment than Petrochemical. But when comparing it to its historical volatility, Tel Aviv 35 is 3.06 times less risky than Petrochemical. It trades about 0.08 of its potential returns per unit of risk. Petrochemical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,500 in Petrochemical on August 29, 2024 and sell it today you would earn a total of 5,550 from holding Petrochemical or generate 38.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tel Aviv 35 vs. Petrochemical
Performance |
| Timeline |
Tel Aviv and Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Tel Aviv 35
Pair trading matchups for Tel Aviv
Petrochemical
Pair trading matchups for Petrochemical
Pair Trading with Tel Aviv and Petrochemical
The main advantage of trading using opposite Tel Aviv and Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tel Aviv position performs unexpectedly, Petrochemical 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 Petrochemical will offset losses from the drop in Petrochemical's long position.| Tel Aviv vs. Azorim Investment Development | Tel Aviv vs. Shagrir Group Vehicle | Tel Aviv vs. Sure Tech Investments LP | Tel Aviv vs. Retailors |
| Petrochemical vs. Brainsway | Petrochemical vs. Mivne Real Estate | Petrochemical vs. Israel Land Development | Petrochemical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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