Correlation Between Isracard and Rimoni

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

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

Diversification Opportunities for Isracard and Rimoni

0.79

Correlation Coefficient

Isracard  Rimoni

Poor diversification

The 3 months correlation between Isracard and Rimoni is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Isracard and Rimoni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rimoni 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 Rimoni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rimoni has no effect on the direction of Isracard i.e., Isracard and Rimoni go up and down completely randomly.

Pair Corralation between Isracard and Rimoni

Assuming the 90 days trading horizon Isracard is expected to generate 0.56 times more return on investment than Rimoni. However, Isracard is 1.8 times less risky than Rimoni. It trades about 0.28 of its potential returns per unit of risk. Rimoni is currently generating about 0.11 per unit of risk. If you would invest  134,700  in Isracard on September 26, 2024 and sell it today you would earn a total of  25,800  from holding Isracard or generate 19.15% return on investment over 90 days.

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

Isracard  vs.  Rimoni

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.

Rimoni

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rimoni are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rimoni sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Isracard and Rimoni

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

The idea behind Isracard and Rimoni 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.