Correlation Between Jerusalem and Klil Industries

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

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

Diversification Opportunities for Jerusalem and Klil Industries

0.83

Correlation Coefficient

Jerusalem  Klil Industries

Very poor diversification

The 3 months correlation between Jerusalem and Klil is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Jerusalem and Klil Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klil Industries and Jerusalem 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 Jerusalem are associated (or correlated) with Klil Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klil Industries has no effect on the direction of Jerusalem i.e., Jerusalem and Klil Industries go up and down completely randomly.

Pair Corralation between Jerusalem and Klil Industries

Assuming the 90 days trading horizon Jerusalem is expected to generate 0.6 times more return on investment than Klil Industries. However, Jerusalem is 1.65 times less risky than Klil Industries. It trades about 0.14 of its potential returns per unit of risk. Klil Industries is currently generating about 0.08 per unit of risk. If you would invest  123,991  in Jerusalem on September 12, 2024 and sell it today you would earn a total of  58,809  from holding Jerusalem or generate 47.43% return on investment over 90 days.

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

Jerusalem  vs.  Klil Industries

Jerusalem

Risk-Adjusted Performance

42 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Jerusalem are ranked lower than 42 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jerusalem sustained solid returns over the last few months and may actually be approaching a breakup point.

Klil Industries

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Klil Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Klil Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jerusalem and Klil Industries

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

The idea behind Jerusalem and Klil Industries 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .