Correlation Between Computer Direct and Clal Insurance

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

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

Diversification Opportunities for Computer Direct and Clal Insurance

0.94

Correlation Coefficient

Computer Direct  Clal Insurance

Almost no diversification

The 3 months correlation between Computer and Clal is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Computer Direct and Clal Insurance Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Insurance Enter and Computer Direct 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 Computer Direct are associated (or correlated) with Clal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Insurance Enter has no effect on the direction of Computer Direct i.e., Computer Direct and Clal Insurance go up and down completely randomly.

Pair Corralation between Computer Direct and Clal Insurance

Assuming the 90 days trading horizon Computer Direct is expected to generate 1.0 times more return on investment than Clal Insurance. However, Computer Direct is 1.0 times less risky than Clal Insurance. It trades about 0.41 of its potential returns per unit of risk. Clal Insurance Enterprises is currently generating about 0.34 per unit of risk. If you would invest  2,619,000  in Computer Direct on September 5, 2024 and sell it today you would earn a total of  1,101,000  from holding Computer Direct or generate 42.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.83%
Values	Daily Returns

Computer Direct  vs.  Clal Insurance Enterprises

Computer Direct

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Direct are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Computer Direct sustained solid returns over the last few months and may actually be approaching a breakup point.

Clal Insurance Enter

Risk-Adjusted Performance

26 of 100

Strong

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

Pair Trading with Computer Direct and Clal Insurance

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

The idea behind Computer Direct and Clal Insurance Enterprises 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.