Correlation Between Bezeq Israeli and IMCO Industries

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

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

Diversification Opportunities for Bezeq Israeli and IMCO Industries

0.87

Correlation Coefficient

Bezeq Israeli  IMCO Industries

Very poor diversification

The 3 months correlation between Bezeq and IMCO is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bezeq Israeli Telecommunicatio and IMCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMCO Industries and Bezeq Israeli 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 Bezeq Israeli Telecommunication are associated (or correlated) with IMCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMCO Industries has no effect on the direction of Bezeq Israeli i.e., Bezeq Israeli and IMCO Industries go up and down completely randomly.

Pair Corralation between Bezeq Israeli and IMCO Industries

Assuming the 90 days trading horizon Bezeq Israeli is expected to generate 1.19 times less return on investment than IMCO Industries. But when comparing it to its historical volatility, Bezeq Israeli Telecommunication is 1.66 times less risky than IMCO Industries. It trades about 0.24 of its potential returns per unit of risk. IMCO Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  299,900  in IMCO Industries on September 26, 2024 and sell it today you would earn a total of  42,400  from holding IMCO Industries or generate 14.14% return on investment over 90 days.

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

Bezeq Israeli Telecommunicatio  vs.  IMCO Industries

Bezeq Israeli Teleco

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bezeq Israeli Telecommunication are ranked lower than 20 (%) 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.

IMCO Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IMCO Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IMCO Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bezeq Israeli and IMCO Industries

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

The idea behind Bezeq Israeli Telecommunication and IMCO Industries 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.