Correlation Between Clal Industries and Airtouch Solar

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

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

Diversification Opportunities for Clal Industries and Airtouch Solar

-0.59

Correlation Coefficient

Clal Industries  Airtouch Solar

Excellent diversification

The 3 months correlation between Clal and Airtouch is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Clal Industries and and Airtouch Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airtouch Solar and Clal Industries 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 Industries and are associated (or correlated) with Airtouch Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airtouch Solar has no effect on the direction of Clal Industries i.e., Clal Industries and Airtouch Solar go up and down completely randomly.

Pair Corralation between Clal Industries and Airtouch Solar

Assuming the 90 days trading horizon Clal Industries and is expected to generate 0.57 times more return on investment than Airtouch Solar. However, Clal Industries and is 1.74 times less risky than Airtouch Solar. It trades about 0.33 of its potential returns per unit of risk. Airtouch Solar is currently generating about -0.1 per unit of risk. If you would invest  188,600  in Clal Industries and on September 4, 2024 and sell it today you would earn a total of  30,200  from holding Clal Industries and or generate 16.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Clal Industries and  vs.  Airtouch Solar

Clal Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Industries and are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Airtouch Solar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airtouch Solar 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 basic 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.

Pair Trading with Clal Industries and Airtouch Solar

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

The idea behind Clal Industries and and Airtouch Solar 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 Transaction History module to view history of all your transactions and understand their impact on performance.