Correlation Between Israel Discount and Skyline Investments

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

Diversification Opportunities for Israel Discount and Skyline Investments

0.89

Correlation Coefficient

Israel Discount  Skyline Investments

Very poor diversification

The 3 months correlation between Israel and Skyline is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Skyline Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline Investments 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 Skyline Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline Investments has no effect on the direction of Israel Discount i.e., Israel Discount and Skyline Investments go up and down completely randomly.

Pair Corralation between Israel Discount and Skyline Investments

Assuming the 90 days trading horizon Israel Discount Bank is expected to generate 0.76 times more return on investment than Skyline Investments. However, Israel Discount Bank is 1.32 times less risky than Skyline Investments. It trades about 0.06 of its potential returns per unit of risk. Skyline Investments is currently generating about 0.04 per unit of risk. If you would invest  166,161  in Israel Discount Bank on September 29, 2024 and sell it today you would earn a total of  75,639  from holding Israel Discount Bank or generate 45.52% return on investment over 90 days.

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

Israel Discount Bank  vs.  Skyline Investments

Israel Discount Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 16 (%) 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.

Skyline Investments

Risk-Adjusted Performance

19 of 100

Solid

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

Pair Trading with Israel Discount and Skyline Investments

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

The idea behind Israel Discount Bank and Skyline Investments 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 Anywhere module to track or share privately all of your investments from the convenience of any device.