Correlation Between Tel Aviv and Orbit Technologies

Can any of the company-specific risk be diversified away by investing in both Tel Aviv and Orbit Technologies 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 Orbit Technologies 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 Orbit Technologies, you can compare the effects of market volatilities on Tel Aviv and Orbit Technologies 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 Orbit Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Orbit Technologies.

Diversification Opportunities for Tel Aviv and Orbit Technologies

0.85

Correlation Coefficient

Tel Aviv  Orbit Technologies

Very poor diversification

The 3 months correlation between Tel and Orbit is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Orbit Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbit Technologies 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 Orbit Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbit Technologies has no effect on the direction of Tel Aviv i.e., Tel Aviv and Orbit Technologies go up and down completely randomly.

Pair Corralation between Tel Aviv and Orbit Technologies

Assuming the 90 days trading horizon Tel Aviv is expected to generate 1.99 times less return on investment than Orbit Technologies. But when comparing it to its historical volatility, Tel Aviv 35 is 1.87 times less risky than Orbit Technologies. It trades about 0.26 of its potential returns per unit of risk. Orbit Technologies is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  229,900  in Orbit Technologies on September 4, 2024 and sell it today you would earn a total of  57,100  from holding Orbit Technologies or generate 24.84% return on investment over 90 days.

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

Tel Aviv 35  vs.  Orbit Technologies

Pair Trading with Tel Aviv and Orbit Technologies

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

The idea behind Tel Aviv 35 and Orbit Technologies 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 Commodity Directory module to find actively traded commodities issued by global exchanges.