Correlation Between Dan Hotels and Gilat Telecom

Can any of the company-specific risk be diversified away by investing in both Dan Hotels and Gilat Telecom 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 Dan Hotels and Gilat Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dan Hotels and Gilat Telecom Global, you can compare the effects of market volatilities on Dan Hotels and Gilat Telecom 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 Dan Hotels with a short position of Gilat Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dan Hotels and Gilat Telecom.

Diversification Opportunities for Dan Hotels and Gilat Telecom

-0.58

Correlation Coefficient

Dan Hotels  Gilat Telecom

Excellent diversification

The 3 months correlation between Dan and Gilat is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dan Hotels and Gilat Telecom Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Telecom Global and Dan Hotels 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 Dan Hotels are associated (or correlated) with Gilat Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Telecom Global has no effect on the direction of Dan Hotels i.e., Dan Hotels and Gilat Telecom go up and down completely randomly.

Pair Corralation between Dan Hotels and Gilat Telecom

Assuming the 90 days trading horizon Dan Hotels is expected to under-perform the Gilat Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Dan Hotels is 1.45 times less risky than Gilat Telecom. The stock trades about -0.06 of its potential returns per unit of risk. The Gilat Telecom Global is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,520  in Gilat Telecom Global on September 30, 2024 and sell it today you would earn a total of  1,920  from holding Gilat Telecom Global or generate 34.78% return on investment over 90 days.

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

Dan Hotels  vs.  Gilat Telecom Global

Dan Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dan Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gilat Telecom Global

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Telecom Global are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gilat Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dan Hotels and Gilat Telecom

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

The idea behind Dan Hotels and Gilat Telecom Global 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.