Correlation Between Poalim Ibi and Value Capital

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

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

Diversification Opportunities for Poalim Ibi and Value Capital

-0.27

Correlation Coefficient

Poalim Ibi  Value Capital

Very good diversification

The 3 months correlation between Poalim and Value is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Poalim Ibi and Value Capital One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Capital One and Poalim Ibi 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 Poalim Ibi are associated (or correlated) with Value Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Capital One has no effect on the direction of Poalim Ibi i.e., Poalim Ibi and Value Capital go up and down completely randomly.

Pair Corralation between Poalim Ibi and Value Capital

Assuming the 90 days trading horizon Poalim Ibi is expected to generate 0.61 times more return on investment than Value Capital. However, Poalim Ibi is 1.65 times less risky than Value Capital. It trades about 0.26 of its potential returns per unit of risk. Value Capital One is currently generating about 0.04 per unit of risk. If you would invest  64,000  in Poalim Ibi on September 29, 2024 and sell it today you would earn a total of  16,800  from holding Poalim Ibi or generate 26.25% return on investment over 90 days.

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

Poalim Ibi  vs.  Value Capital One

Poalim Ibi

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Poalim Ibi are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Poalim Ibi sustained solid returns over the last few months and may actually be approaching a breakup point.

Value Capital One

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Value Capital One are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Value Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Poalim Ibi and Value Capital

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

The idea behind Poalim Ibi and Value Capital One 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.