Correlation Between Norstar and Mizrahi Tefahot

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

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

Diversification Opportunities for Norstar and Mizrahi Tefahot

0.87

Correlation Coefficient

Norstar  Mizrahi Tefahot

Very poor diversification

The 3 months correlation between Norstar and Mizrahi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Norstar and Mizrahi Tefahot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mizrahi Tefahot and Norstar 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 Norstar are associated (or correlated) with Mizrahi Tefahot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mizrahi Tefahot has no effect on the direction of Norstar i.e., Norstar and Mizrahi Tefahot go up and down completely randomly.

Pair Corralation between Norstar and Mizrahi Tefahot

Assuming the 90 days trading horizon Norstar is expected to generate 2.34 times more return on investment than Mizrahi Tefahot. However, Norstar is 2.34 times more volatile than Mizrahi Tefahot. It trades about 0.18 of its potential returns per unit of risk. Mizrahi Tefahot is currently generating about 0.18 per unit of risk. If you would invest  108,800  in Norstar on September 26, 2024 and sell it today you would earn a total of  29,200  from holding Norstar or generate 26.84% return on investment over 90 days.

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

Norstar  vs.  Mizrahi Tefahot

Norstar

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norstar are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Norstar sustained solid returns over the last few months and may actually be approaching a breakup point.

Mizrahi Tefahot

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mizrahi Tefahot are ranked lower than 14 (%) 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.

Pair Trading with Norstar and Mizrahi Tefahot

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

The idea behind Norstar and Mizrahi Tefahot 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.