Correlation Between Israel China and Azrieli

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

By analyzing existing cross correlation between Israel China Biotechnology and Azrieli Group, you can compare the effects of market volatilities on Israel China and Azrieli 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 China with a short position of Azrieli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel China and Azrieli.

Diversification Opportunities for Israel China and Azrieli

-0.53

Correlation Coefficient

Israel China  Azrieli

Excellent diversification

The 3 months correlation between Israel and Azrieli is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Israel China Biotechnology and Azrieli Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azrieli Group and Israel China 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 China Biotechnology are associated (or correlated) with Azrieli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azrieli Group has no effect on the direction of Israel China i.e., Israel China and Azrieli go up and down completely randomly.

Pair Corralation between Israel China and Azrieli

Assuming the 90 days trading horizon Israel China Biotechnology is expected to under-perform the Azrieli. In addition to that, Israel China is 1.72 times more volatile than Azrieli Group. It trades about -0.03 of its total potential returns per unit of risk. Azrieli Group is currently generating about 0.18 per unit of volatility. If you would invest  2,441,000  in Azrieli Group on September 5, 2024 and sell it today you would earn a total of  430,000  from holding Azrieli Group or generate 17.62% return on investment over 90 days.

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

Israel China Biotechnology  vs.  Azrieli Group

Israel China Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Israel China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Azrieli Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Azrieli Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Azrieli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel China and Azrieli

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

The idea behind Israel China Biotechnology and Azrieli 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.