Correlation Between Solaer Israel and OY Nofar

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

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

Diversification Opportunities for Solaer Israel and OY Nofar

0.27

Correlation Coefficient

Solaer Israel  OY Nofar

Modest diversification

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

Pair Corralation between Solaer Israel and OY Nofar

Assuming the 90 days trading horizon Solaer Israel is expected to generate 1.09 times more return on investment than OY Nofar. However, Solaer Israel is 1.09 times more volatile than OY Nofar Energy. It trades about 0.15 of its potential returns per unit of risk. OY Nofar Energy is currently generating about 0.14 per unit of risk. If you would invest  331,300  in Solaer Israel on September 15, 2024 and sell it today you would earn a total of  21,400  from holding Solaer Israel or generate 6.46% return on investment over 90 days.

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

Solaer Israel  vs.  OY Nofar Energy

Solaer Israel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solaer Israel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solaer Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

OY Nofar Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OY Nofar Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, OY Nofar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Solaer Israel and OY Nofar

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

The idea behind Solaer Israel and OY Nofar Energy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.