Correlation Between Migdal Insurance and Castro

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

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

Diversification Opportunities for Migdal Insurance and Castro

0.9

Correlation Coefficient

Migdal Insurance  Castro

Almost no diversification

The 3 months correlation between Migdal and Castro is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Migdal Insurance and Castro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castro and Migdal Insurance 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 Migdal Insurance are associated (or correlated) with Castro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castro has no effect on the direction of Migdal Insurance i.e., Migdal Insurance and Castro go up and down completely randomly.

Pair Corralation between Migdal Insurance and Castro

Assuming the 90 days trading horizon Migdal Insurance is expected to generate 0.74 times more return on investment than Castro. However, Migdal Insurance is 1.36 times less risky than Castro. It trades about 0.52 of its potential returns per unit of risk. Castro is currently generating about 0.23 per unit of risk. If you would invest  45,890  in Migdal Insurance on September 15, 2024 and sell it today you would earn a total of  22,410  from holding Migdal Insurance or generate 48.83% return on investment over 90 days.

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

Migdal Insurance  vs.  Castro

Migdal Insurance

Risk-Adjusted Performance

41 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Migdal Insurance are ranked lower than 41 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Migdal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Castro

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Migdal Insurance and Castro

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

The idea behind Migdal Insurance and Castro 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.