Correlation Between Direct Capital and Bezeq Israeli

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

By analyzing existing cross correlation between Direct Capital Investments and Bezeq Israeli Telecommunication, you can compare the effects of market volatilities on Direct Capital and Bezeq Israeli 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 Direct Capital with a short position of Bezeq Israeli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Capital and Bezeq Israeli.

Diversification Opportunities for Direct Capital and Bezeq Israeli

-0.88

Correlation Coefficient

Direct Capital  Bezeq Israeli

Pay attention - limited upside

The 3 months correlation between Direct and Bezeq is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Direct Capital Investments and Bezeq Israeli Telecommunicatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bezeq Israeli Teleco and Direct Capital 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 Direct Capital Investments are associated (or correlated) with Bezeq Israeli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bezeq Israeli Teleco has no effect on the direction of Direct Capital i.e., Direct Capital and Bezeq Israeli go up and down completely randomly.

Pair Corralation between Direct Capital and Bezeq Israeli

Assuming the 90 days trading horizon Direct Capital Investments is expected to generate 5.22 times more return on investment than Bezeq Israeli. However, Direct Capital is 5.22 times more volatile than Bezeq Israeli Telecommunication. It trades about 0.15 of its potential returns per unit of risk. Bezeq Israeli Telecommunication is currently generating about 0.26 per unit of risk. If you would invest  80,000  in Direct Capital Investments on September 13, 2024 and sell it today you would earn a total of  15,000  from holding Direct Capital Investments or generate 18.75% return on investment over 90 days.

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

Direct Capital Investments  vs.  Bezeq Israeli Telecommunicatio

Direct Capital Inves

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direct Capital Investments 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.

Bezeq Israeli Teleco

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bezeq Israeli Telecommunication are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bezeq Israeli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Capital and Bezeq Israeli

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

The idea behind Direct Capital Investments and Bezeq Israeli Telecommunication 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..