Correlation Between Sarfati and Israel Discount

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

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

Diversification Opportunities for Sarfati and Israel Discount

0.97

Correlation Coefficient

Sarfati  Israel Discount

Almost no diversification

The 3 months correlation between Sarfati and Israel is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sarfati and Israel Discount Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Discount Bank and Sarfati 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 Sarfati are associated (or correlated) with Israel Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Discount Bank has no effect on the direction of Sarfati i.e., Sarfati and Israel Discount go up and down completely randomly.

Pair Corralation between Sarfati and Israel Discount

Assuming the 90 days trading horizon Sarfati is expected to generate 0.99 times more return on investment than Israel Discount. However, Sarfati is 1.01 times less risky than Israel Discount. It trades about 0.24 of its potential returns per unit of risk. Israel Discount Bank is currently generating about 0.21 per unit of risk. If you would invest  349,800  in Sarfati on September 29, 2024 and sell it today you would earn a total of  69,500  from holding Sarfati or generate 19.87% return on investment over 90 days.

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

Sarfati  vs.  Israel Discount Bank

Sarfati

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sarfati are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sarfati sustained solid returns over the last few months and may actually be approaching a breakup point.

Israel Discount Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Discount sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarfati and Israel Discount

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

The idea behind Sarfati and Israel Discount Bank 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.