Correlation Between Israel Corp and Nova

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

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

Diversification Opportunities for Israel Corp and Nova

-0.55

Correlation Coefficient

Israel Corp  Nova

Excellent diversification

The 3 months correlation between Israel and Nova is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Israel Corp and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova and Israel Corp 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 Corp are associated (or correlated) with Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of Israel Corp i.e., Israel Corp and Nova go up and down completely randomly.

Pair Corralation between Israel Corp and Nova

Assuming the 90 days trading horizon Israel Corp is expected to generate 0.76 times more return on investment than Nova. However, Israel Corp is 1.31 times less risky than Nova. It trades about 0.23 of its potential returns per unit of risk. Nova is currently generating about -0.02 per unit of risk. If you would invest  7,398,000  in Israel Corp on September 16, 2024 and sell it today you would earn a total of  2,491,000  from holding Israel Corp or generate 33.67% return on investment over 90 days.

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

Israel Corp  vs.  Nova

Israel Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Nova

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Israel Corp and Nova

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

The idea behind Israel Corp and Nova 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.