Correlation Between Clal Biotechnology and Energix Renewable

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

By analyzing existing cross correlation between Clal Biotechnology Industries and Energix Renewable Energies, you can compare the effects of market volatilities on Clal Biotechnology and Energix Renewable 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 Clal Biotechnology with a short position of Energix Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Biotechnology and Energix Renewable.

Diversification Opportunities for Clal Biotechnology and Energix Renewable

0.62

Correlation Coefficient

Clal Biotechnology  Energix Renewable

Poor diversification

The 3 months correlation between Clal and Energix is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and Energix Renewable Energies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energix Renewable and Clal Biotechnology 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 Clal Biotechnology Industries are associated (or correlated) with Energix Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energix Renewable has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and Energix Renewable go up and down completely randomly.

Pair Corralation between Clal Biotechnology and Energix Renewable

Assuming the 90 days trading horizon Clal Biotechnology Industries is expected to under-perform the Energix Renewable. In addition to that, Clal Biotechnology is 1.3 times more volatile than Energix Renewable Energies. It trades about -0.07 of its total potential returns per unit of risk. Energix Renewable Energies is currently generating about -0.04 per unit of volatility. If you would invest  127,923  in Energix Renewable Energies on September 14, 2024 and sell it today you would lose (6,723) from holding Energix Renewable Energies or give up 5.26% of portfolio value over 90 days.

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

Clal Biotechnology Industries  vs.  Energix Renewable Energies

Clal Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clal Biotechnology Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Energix Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energix Renewable Energies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Energix Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clal Biotechnology and Energix Renewable

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

The idea behind Clal Biotechnology Industries and Energix Renewable Energies 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.