Correlation Between Israel Land and Aerodrome

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

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

Diversification Opportunities for Israel Land and Aerodrome

0.4

Correlation Coefficient

Israel Land  Aerodrome

Very weak diversification

The 3 months correlation between Israel and Aerodrome is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Israel Land Development and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and Israel Land 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 Land Development are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of Israel Land i.e., Israel Land and Aerodrome go up and down completely randomly.

Pair Corralation between Israel Land and Aerodrome

Assuming the 90 days trading horizon Israel Land is expected to generate 4.5 times less return on investment than Aerodrome. But when comparing it to its historical volatility, Israel Land Development is 7.38 times less risky than Aerodrome. It trades about 0.22 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,300  in Aerodrome Group on September 3, 2024 and sell it today you would earn a total of  3,310  from holding Aerodrome Group or generate 76.98% return on investment over 90 days.

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

Israel Land Development  vs.  Aerodrome Group

Israel Land Development

Risk-Adjusted Performance

17 of 100

Solid

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

Aerodrome Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel Land and Aerodrome

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

The idea behind Israel Land Development and Aerodrome 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.

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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.