Correlation Between Mizrahi Tefahot and Sarfati

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

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

Diversification Opportunities for Mizrahi Tefahot and Sarfati

0.92

Correlation Coefficient

Mizrahi Tefahot  Sarfati

Almost no diversification

The 3 months correlation between Mizrahi and Sarfati is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Mizrahi Tefahot and Sarfati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarfati 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 Sarfati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarfati has no effect on the direction of Mizrahi Tefahot i.e., Mizrahi Tefahot and Sarfati go up and down completely randomly.

Pair Corralation between Mizrahi Tefahot and Sarfati

Assuming the 90 days trading horizon Mizrahi Tefahot is expected to under-perform the Sarfati. But the stock apears to be less risky and, when comparing its historical volatility, Mizrahi Tefahot is 1.54 times less risky than Sarfati. The stock trades about -0.18 of its potential returns per unit of risk. The Sarfati is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  402,000  in Sarfati on September 28, 2024 and sell it today you would earn a total of  17,300  from holding Sarfati or generate 4.3% 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.  Sarfati

Mizrahi Tefahot

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mizrahi Tefahot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mizrahi Tefahot may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sarfati

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sarfati are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sarfati sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mizrahi Tefahot and Sarfati

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

The idea behind Mizrahi Tefahot and Sarfati 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.