Correlation Between Israel China and Direct Capital

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

Diversification Opportunities for Israel China and Direct Capital

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Israel and Direct is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Israel China Biotechnology and Direct Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Capital Inves 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 Direct Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Capital Inves has no effect on the direction of Israel China i.e., Israel China and Direct Capital go up and down completely randomly.

Pair Corralation between Israel China and Direct Capital

Assuming the 90 days trading horizon Israel China is expected to generate 1.13 times less return on investment than Direct Capital. But when comparing it to its historical volatility, Israel China Biotechnology is 1.08 times less risky than Direct Capital. It trades about 0.06 of its potential returns per unit of risk. Direct Capital Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,200  in Direct Capital Investments on September 5, 2024 and sell it today you would earn a total of  86,240  from holding Direct Capital Investments or generate 1390.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Israel China Biotechnology  vs.  Direct Capital Investments

 Performance 
       Timeline  
Israel China Biotech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Direct Capital Inves 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Direct Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Israel China and Direct Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Israel China and Direct Capital

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

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