Correlation Between Tel Aviv and Galileo Tech

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

By analyzing existing cross correlation between Tel Aviv 35 and Galileo Tech, you can compare the effects of market volatilities on Tel Aviv and Galileo Tech 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 Tel Aviv with a short position of Galileo Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Galileo Tech.

Diversification Opportunities for Tel Aviv and Galileo Tech

-0.08

Correlation Coefficient

Tel Aviv  Galileo Tech

Good diversification

The 3 months correlation between Tel and Galileo is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Galileo Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galileo Tech and Tel Aviv 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 Tel Aviv 35 are associated (or correlated) with Galileo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galileo Tech has no effect on the direction of Tel Aviv i.e., Tel Aviv and Galileo Tech go up and down completely randomly.

Pair Corralation between Tel Aviv and Galileo Tech

Assuming the 90 days trading horizon Tel Aviv 35 is expected to generate 0.14 times more return on investment than Galileo Tech. However, Tel Aviv 35 is 6.96 times less risky than Galileo Tech. It trades about 0.21 of its potential returns per unit of risk. Galileo Tech is currently generating about -0.16 per unit of risk. If you would invest  226,759  in Tel Aviv 35 on September 15, 2024 and sell it today you would earn a total of  6,787  from holding Tel Aviv 35 or generate 2.99% return on investment over 90 days.

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

Tel Aviv 35  vs.  Galileo Tech

Pair Trading with Tel Aviv and Galileo Tech

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

The idea behind Tel Aviv 35 and Galileo Tech 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.