Correlation Between Mizrahi Tefahot and EN Shoham

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

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

Diversification Opportunities for Mizrahi Tefahot and EN Shoham

0.91

Correlation Coefficient

Mizrahi Tefahot  EN Shoham

Almost no diversification

The 3 months correlation between Mizrahi and SHOM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mizrahi Tefahot and EN Shoham Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EN Shoham Business and Mizrahi Tefahot 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 Mizrahi Tefahot are associated (or correlated) with EN Shoham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EN Shoham Business has no effect on the direction of Mizrahi Tefahot i.e., Mizrahi Tefahot and EN Shoham go up and down completely randomly.

Pair Corralation between Mizrahi Tefahot and EN Shoham

Assuming the 90 days trading horizon Mizrahi Tefahot is expected to generate 12.06 times less return on investment than EN Shoham. But when comparing it to its historical volatility, Mizrahi Tefahot is 1.86 times less risky than EN Shoham. It trades about 0.07 of its potential returns per unit of risk. EN Shoham Business is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  63,335  in EN Shoham Business on September 16, 2024 and sell it today you would earn a total of  11,465  from holding EN Shoham Business or generate 18.1% return on investment over 90 days.

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

Mizrahi Tefahot  vs.  EN Shoham Business

Mizrahi Tefahot

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mizrahi Tefahot are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mizrahi Tefahot sustained solid returns over the last few months and may actually be approaching a breakup point.

EN Shoham Business

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EN Shoham Business are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EN Shoham sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mizrahi Tefahot and EN Shoham

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

The idea behind Mizrahi Tefahot and EN Shoham Business 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.