Correlation Between Migdal Insurance and More Provident

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

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

Diversification Opportunities for Migdal Insurance and More Provident

0.94

Correlation Coefficient

Migdal Insurance  More Provident

Almost no diversification

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

Pair Corralation between Migdal Insurance and More Provident

Assuming the 90 days trading horizon Migdal Insurance is expected to generate 1.27 times less return on investment than More Provident. But when comparing it to its historical volatility, Migdal Insurance is 1.37 times less risky than More Provident. It trades about 0.57 of its potential returns per unit of risk. More Provident Funds is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  43,721  in More Provident Funds on September 17, 2024 and sell it today you would earn a total of  30,359  from holding More Provident Funds or generate 69.44% 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.  More Provident Funds

Migdal Insurance

Risk-Adjusted Performance

44 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Migdal Insurance are ranked lower than 44 (%) 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.

More Provident Funds

Risk-Adjusted Performance

41 of 100

Very Strong

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

Pair Trading with Migdal Insurance and More Provident

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

The idea behind Migdal Insurance and More Provident Funds 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.