Correlation Between Clal Biotechnology and Automatic Bank

Can any of the company-specific risk be diversified away by investing in both Clal Biotechnology and Automatic Bank 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 Automatic Bank 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 Automatic Bank Services, you can compare the effects of market volatilities on Clal Biotechnology and Automatic Bank 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 Automatic Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Biotechnology and Automatic Bank.

Diversification Opportunities for Clal Biotechnology and Automatic Bank

-0.71

Correlation Coefficient

Clal Biotechnology  Automatic Bank

Pay attention - limited upside

The 3 months correlation between Clal and Automatic is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and Automatic Bank Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Bank Services 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 Automatic Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Bank Services has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and Automatic Bank go up and down completely randomly.

Pair Corralation between Clal Biotechnology and Automatic Bank

Assuming the 90 days trading horizon Clal Biotechnology Industries is expected to under-perform the Automatic Bank. In addition to that, Clal Biotechnology is 1.11 times more volatile than Automatic Bank Services. It trades about -0.07 of its total potential returns per unit of risk. Automatic Bank Services is currently generating about 0.52 per unit of volatility. If you would invest  142,000  in Automatic Bank Services on September 16, 2024 and sell it today you would earn a total of  112,800  from holding Automatic Bank Services or generate 79.44% return on investment over 90 days.

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

Clal Biotechnology Industries  vs.  Automatic Bank Services

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.

Automatic Bank Services

Risk-Adjusted Performance

40 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Bank Services are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automatic Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clal Biotechnology and Automatic Bank

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

The idea behind Clal Biotechnology Industries and Automatic Bank Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.