Correlation Between Delek and Reit 1

Can any of the company-specific risk be diversified away by investing in both Delek and Reit 1 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 Delek and Reit 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delek Group and Reit 1, you can compare the effects of market volatilities on Delek and Reit 1 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 Delek with a short position of Reit 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delek and Reit 1.

Diversification Opportunities for Delek and Reit 1

0.94

Correlation Coefficient

Delek  Reit 1

Almost no diversification

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

Pair Corralation between Delek and Reit 1

Assuming the 90 days trading horizon Delek is expected to generate 6.31 times less return on investment than Reit 1. But when comparing it to its historical volatility, Delek Group is 1.97 times less risky than Reit 1. It trades about 0.06 of its potential returns per unit of risk. Reit 1 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  177,586  in Reit 1 on September 25, 2024 and sell it today you would earn a total of  12,914  from holding Reit 1 or generate 7.27% return on investment over 90 days.

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

Delek Group  vs.  Reit 1

Delek Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Delek unveiled solid returns over the last few months and may actually be approaching a breakup point.

Reit 1

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Reit 1 are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Reit 1 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delek and Reit 1

The main advantage of trading using opposite Delek and Reit 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek position performs unexpectedly, Reit 1 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 Reit 1 will offset losses from the drop in Reit 1's long position.

The idea behind Delek Group and Reit 1 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.