Correlation Between Isracard and Palram

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

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

Diversification Opportunities for Isracard and Palram

0.94

Correlation Coefficient

Isracard  Palram

Almost no diversification

The 3 months correlation between Isracard and Palram is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Isracard and Palram in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palram and Isracard 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 Isracard are associated (or correlated) with Palram. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palram has no effect on the direction of Isracard i.e., Isracard and Palram go up and down completely randomly.

Pair Corralation between Isracard and Palram

Assuming the 90 days trading horizon Isracard is expected to generate 1.37 times less return on investment than Palram. But when comparing it to its historical volatility, Isracard is 1.13 times less risky than Palram. It trades about 0.28 of its potential returns per unit of risk. Palram is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  663,300  in Palram on September 26, 2024 and sell it today you would earn a total of  175,500  from holding Palram or generate 26.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.83%
Values	Daily Returns

Isracard  vs.  Palram

Isracard

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Isracard are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Isracard sustained solid returns over the last few months and may actually be approaching a breakup point.

Palram

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palram are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Palram sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Isracard and Palram

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

The idea behind Isracard and Palram 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.