Correlation Between Ilex Medical and Israel Opportunity

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

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

Diversification Opportunities for Ilex Medical and Israel Opportunity

-0.49

Correlation Coefficient

Ilex Medical  Israel Opportunity

Very good diversification

The 3 months correlation between Ilex and Israel is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ilex Medical and Israel Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Opportunity and Ilex Medical 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 Ilex Medical are associated (or correlated) with Israel Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Opportunity has no effect on the direction of Ilex Medical i.e., Ilex Medical and Israel Opportunity go up and down completely randomly.

Pair Corralation between Ilex Medical and Israel Opportunity

Assuming the 90 days trading horizon Ilex Medical is expected to generate 0.74 times more return on investment than Israel Opportunity. However, Ilex Medical is 1.36 times less risky than Israel Opportunity. It trades about 0.29 of its potential returns per unit of risk. Israel Opportunity is currently generating about -0.03 per unit of risk. If you would invest  638,000  in Ilex Medical on August 30, 2024 and sell it today you would earn a total of  132,300  from holding Ilex Medical or generate 20.74% return on investment over 90 days.

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

Ilex Medical  vs.  Israel Opportunity

Ilex Medical

Risk-Adjusted Performance

10 of 100

OK

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

Israel Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ilex Medical and Israel Opportunity

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

The idea behind Ilex Medical and Israel Opportunity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.