Correlation Between Mizrahi Tefahot and Solaer Israel

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

By analyzing existing cross correlation between Mizrahi Tefahot and Solaer Israel, you can compare the effects of market volatilities on Mizrahi Tefahot and Solaer Israel 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 Solaer Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mizrahi Tefahot and Solaer Israel.

Diversification Opportunities for Mizrahi Tefahot and Solaer Israel

0.65

Correlation Coefficient

Mizrahi Tefahot  Solaer Israel

Poor diversification

The 3 months correlation between Mizrahi and Solaer is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Mizrahi Tefahot and Solaer Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaer Israel 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 Solaer Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaer Israel has no effect on the direction of Mizrahi Tefahot i.e., Mizrahi Tefahot and Solaer Israel go up and down completely randomly.

Pair Corralation between Mizrahi Tefahot and Solaer Israel

Assuming the 90 days trading horizon Mizrahi Tefahot is expected to generate 0.54 times more return on investment than Solaer Israel. However, Mizrahi Tefahot is 1.84 times less risky than Solaer Israel. It trades about 0.28 of its potential returns per unit of risk. Solaer Israel is currently generating about 0.08 per unit of risk. If you would invest  1,345,418  in Mizrahi Tefahot on September 15, 2024 and sell it today you would earn a total of  265,582  from holding Mizrahi Tefahot or generate 19.74% return on investment over 90 days.

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

Mizrahi Tefahot  vs.  Solaer Israel

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.

Solaer Israel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solaer Israel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solaer Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mizrahi Tefahot and Solaer Israel

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

The idea behind Mizrahi Tefahot and Solaer Israel 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 Global Correlations module to find global opportunities by holding instruments from different markets.