Correlation Between Israel Opportunity and Clal Insurance

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

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

Diversification Opportunities for Israel Opportunity and Clal Insurance

0.42

Correlation Coefficient

Israel Opportunity  Clal Insurance

Very weak diversification

The 3 months correlation between Israel and Clal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Israel Opportunity and Clal Insurance Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Insurance Enter and Israel Opportunity 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 Opportunity are associated (or correlated) with Clal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Insurance Enter has no effect on the direction of Israel Opportunity i.e., Israel Opportunity and Clal Insurance go up and down completely randomly.

Pair Corralation between Israel Opportunity and Clal Insurance

Assuming the 90 days trading horizon Israel Opportunity is expected to under-perform the Clal Insurance. In addition to that, Israel Opportunity is 1.39 times more volatile than Clal Insurance Enterprises. It trades about -0.04 of its total potential returns per unit of risk. Clal Insurance Enterprises is currently generating about 0.3 per unit of volatility. If you would invest  591,500  in Clal Insurance Enterprises on September 2, 2024 and sell it today you would earn a total of  179,700  from holding Clal Insurance Enterprises or generate 30.38% return on investment over 90 days.

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

Israel Opportunity   vs.  Clal Insurance Enterprises

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.

Clal Insurance Enter

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel Opportunity and Clal Insurance

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

The idea behind Israel Opportunity and Clal Insurance Enterprises 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.