Correlation Between Israel Discount and Big Shopping

Can any of the company-specific risk be diversified away by investing in both Israel Discount and Big Shopping 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 Big Shopping 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 Big Shopping Centers, you can compare the effects of market volatilities on Israel Discount and Big Shopping 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 Big Shopping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and Big Shopping.

Diversification Opportunities for Israel Discount and Big Shopping

0.96

Correlation Coefficient

Israel Discount  Big Shopping

Almost no diversification

The 3 months correlation between Israel and Big is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Big Shopping Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Shopping Centers 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 Big Shopping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Shopping Centers has no effect on the direction of Israel Discount i.e., Israel Discount and Big Shopping go up and down completely randomly.

Pair Corralation between Israel Discount and Big Shopping

Assuming the 90 days trading horizon Israel Discount is expected to generate 1.12 times less return on investment than Big Shopping. But when comparing it to its historical volatility, Israel Discount Bank is 1.07 times less risky than Big Shopping. It trades about 0.06 of its potential returns per unit of risk. Big Shopping Centers is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,536,000  in Big Shopping Centers on September 26, 2024 and sell it today you would earn a total of  1,847,000  from holding Big Shopping Centers or generate 52.23% return on investment over 90 days.

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

Israel Discount Bank  vs.  Big Shopping Centers

Israel Discount Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 19 (%) 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.

Big Shopping Centers

Risk-Adjusted Performance

32 of 100

Very Strong

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

Pair Trading with Israel Discount and Big Shopping

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

The idea behind Israel Discount Bank and Big Shopping Centers 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.