Correlation Between Israel Discount and Peninsula

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

Diversification Opportunities for Israel Discount and Peninsula

0.97

Correlation Coefficient

Israel Discount  Peninsula

Almost no diversification

The 3 months correlation between Israel and Peninsula is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Peninsula Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Group 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 Peninsula. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Group has no effect on the direction of Israel Discount i.e., Israel Discount and Peninsula go up and down completely randomly.

Pair Corralation between Israel Discount and Peninsula

Assuming the 90 days trading horizon Israel Discount is expected to generate 1.28 times less return on investment than Peninsula. In addition to that, Israel Discount is 1.19 times more volatile than Peninsula Group. It trades about 0.29 of its total potential returns per unit of risk. Peninsula Group is currently generating about 0.44 per unit of volatility. If you would invest  16,363  in Peninsula Group on September 12, 2024 and sell it today you would earn a total of  5,517  from holding Peninsula Group or generate 33.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.83%
Values	Daily Returns

Israel Discount Bank  vs.  Peninsula Group

Israel Discount Bank

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 22 (%) 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.

Peninsula Group

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Group are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Peninsula sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel Discount and Peninsula

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

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