Correlation Between Clal Biotechnology and Skyline Investments

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

Diversification Opportunities for Clal Biotechnology and Skyline Investments

-0.76

Correlation Coefficient

Clal Biotechnology  Skyline Investments

Pay attention - limited upside

The 3 months correlation between Clal and Skyline is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Clal Biotechnology Industries and Skyline Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline Investments 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 Skyline Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline Investments has no effect on the direction of Clal Biotechnology i.e., Clal Biotechnology and Skyline Investments go up and down completely randomly.

Pair Corralation between Clal Biotechnology and Skyline Investments

Assuming the 90 days trading horizon Clal Biotechnology Industries is expected to under-perform the Skyline Investments. In addition to that, Clal Biotechnology is 1.63 times more volatile than Skyline Investments. It trades about -0.07 of its total potential returns per unit of risk. Skyline Investments is currently generating about 0.34 per unit of volatility. If you would invest  149,500  in Skyline Investments on September 15, 2024 and sell it today you would earn a total of  44,500  from holding Skyline Investments or generate 29.77% 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.  Skyline Investments

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.

Skyline Investments

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline Investments are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Skyline Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clal Biotechnology and Skyline Investments

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

The idea behind Clal Biotechnology Industries and Skyline Investments 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.