Correlation Between Israel Discount and America Movil

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

By analyzing existing cross correlation between Israel Discount Bank and Automax Motors, you can compare the effects of market volatilities on Israel Discount and America Movil 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 Israel Discount with a short position of America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and America Movil.

Diversification Opportunities for Israel Discount and America Movil

0.03

Correlation Coefficient

Israel Discount  America Movil

Significant diversification

The 3 months correlation between Israel and America is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Automax Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automax Motors and Israel Discount 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 Israel Discount Bank are associated (or correlated) with America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automax Motors has no effect on the direction of Israel Discount i.e., Israel Discount and America Movil go up and down completely randomly.

Pair Corralation between Israel Discount and America Movil

Assuming the 90 days trading horizon Israel Discount is expected to generate 4.84 times less return on investment than America Movil. But when comparing it to its historical volatility, Israel Discount Bank is 11.63 times less risky than America Movil. It trades about 0.05 of its potential returns per unit of risk. Automax Motors is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,600  in Automax Motors on September 4, 2024 and sell it today you would lose (12,770) from holding Automax Motors or give up 87.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.74%
Values	Daily Returns

Israel Discount Bank  vs.  Automax Motors

Israel Discount Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Discount sustained solid returns over the last few months and may actually be approaching a breakup point.

Automax Motors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automax Motors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, America Movil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Israel Discount and America Movil

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

The idea behind Israel Discount Bank and Automax Motors 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.