Correlation Between Israel Discount and Solaer Israel

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

Diversification Opportunities for Israel Discount and Solaer Israel

0.28

Correlation Coefficient

Israel Discount  Solaer Israel

Modest diversification

The 3 months correlation between Israel and Solaer is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Solaer Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaer Israel 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 Solaer Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaer Israel has no effect on the direction of Israel Discount i.e., Israel Discount and Solaer Israel go up and down completely randomly.

Pair Corralation between Israel Discount and Solaer Israel

Assuming the 90 days trading horizon Israel Discount Bank is expected to generate 0.67 times more return on investment than Solaer Israel. However, Israel Discount Bank is 1.48 times less risky than Solaer Israel. It trades about 0.31 of its potential returns per unit of risk. Solaer Israel is currently generating about 0.08 per unit of risk. If you would invest  193,397  in Israel Discount Bank on September 16, 2024 and sell it today you would earn a total of  52,503  from holding Israel Discount Bank or generate 27.15% return on investment over 90 days.

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

Israel Discount Bank  vs.  Solaer Israel

Israel Discount Bank

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 24 (%) 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.

Solaer Israel

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Solaer Israel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Solaer Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel Discount and Solaer Israel

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

The idea behind Israel Discount Bank and Solaer Israel 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.