Correlation Between Arad and Bezeq Israeli

Can any of the company-specific risk be diversified away by investing in both Arad and Bezeq Israeli 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 Arad and Bezeq Israeli into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arad and Bezeq Israeli Telecommunication, you can compare the effects of market volatilities on Arad and Bezeq Israeli 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 Arad with a short position of Bezeq Israeli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arad and Bezeq Israeli.

Diversification Opportunities for Arad and Bezeq Israeli

0.86

Correlation Coefficient

Arad  Bezeq Israeli

Very poor diversification

The 3 months correlation between Arad and Bezeq is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Arad and Bezeq Israeli Telecommunicatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bezeq Israeli Teleco and Arad 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 Arad are associated (or correlated) with Bezeq Israeli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bezeq Israeli Teleco has no effect on the direction of Arad i.e., Arad and Bezeq Israeli go up and down completely randomly.

Pair Corralation between Arad and Bezeq Israeli

Assuming the 90 days trading horizon Arad is expected to generate 2.19 times less return on investment than Bezeq Israeli. But when comparing it to its historical volatility, Arad is 1.19 times less risky than Bezeq Israeli. It trades about 0.08 of its potential returns per unit of risk. Bezeq Israeli Telecommunication is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  42,746  in Bezeq Israeli Telecommunication on September 15, 2024 and sell it today you would earn a total of  10,554  from holding Bezeq Israeli Telecommunication or generate 24.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Arad  vs.  Bezeq Israeli Telecommunicatio

Arad

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Arad may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bezeq Israeli Teleco

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bezeq Israeli Telecommunication are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bezeq Israeli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arad and Bezeq Israeli

The main advantage of trading using opposite Arad and Bezeq Israeli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad position performs unexpectedly, Bezeq Israeli 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 Bezeq Israeli will offset losses from the drop in Bezeq Israeli's long position.

The idea behind Arad and Bezeq Israeli Telecommunication 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..