Correlation Between Sofwave Medical and Migdal Insurance

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

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

Diversification Opportunities for Sofwave Medical and Migdal Insurance

-0.17

Correlation Coefficient

Sofwave Medical  Migdal Insurance

Good diversification

The 3 months correlation between Sofwave and Migdal is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sofwave Medical and Migdal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Migdal Insurance and Sofwave Medical 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 Sofwave Medical are associated (or correlated) with Migdal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Migdal Insurance has no effect on the direction of Sofwave Medical i.e., Sofwave Medical and Migdal Insurance go up and down completely randomly.

Pair Corralation between Sofwave Medical and Migdal Insurance

Assuming the 90 days trading horizon Sofwave Medical is expected to under-perform the Migdal Insurance. In addition to that, Sofwave Medical is 1.97 times more volatile than Migdal Insurance. It trades about -0.06 of its total potential returns per unit of risk. Migdal Insurance is currently generating about 0.39 per unit of volatility. If you would invest  50,605  in Migdal Insurance on September 27, 2024 and sell it today you would earn a total of  16,095  from holding Migdal Insurance or generate 31.81% return on investment over 90 days.

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

Sofwave Medical  vs.  Migdal Insurance

Sofwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofwave Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Migdal Insurance

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Migdal Insurance are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Migdal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sofwave Medical and Migdal Insurance

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

The idea behind Sofwave Medical and Migdal Insurance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.