Correlation Between Optical Cable and Ituran Location

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

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

Diversification Opportunities for Optical Cable and Ituran Location

-0.29

Correlation Coefficient

Optical Cable  Ituran Location

Very good diversification

The 3 months correlation between Optical and Ituran is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and Ituran Location and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ituran Location and Optical Cable 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 Optical Cable are associated (or correlated) with Ituran Location. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ituran Location has no effect on the direction of Optical Cable i.e., Optical Cable and Ituran Location go up and down completely randomly.

Pair Corralation between Optical Cable and Ituran Location

Considering the 90-day investment horizon Optical Cable is expected to under-perform the Ituran Location. In addition to that, Optical Cable is 1.97 times more volatile than Ituran Location and. It trades about -0.1 of its total potential returns per unit of risk. Ituran Location and is currently generating about 0.12 per unit of volatility. If you would invest  2,751  in Ituran Location and on September 3, 2024 and sell it today you would earn a total of  265.00  from holding Ituran Location and or generate 9.63% return on investment over 90 days.

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

Optical Cable  vs.  Ituran Location and

Optical Cable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optical Cable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ituran Location

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Optical Cable and Ituran Location

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

The idea behind Optical Cable and Ituran Location and 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.