Correlation Between Tel Aviv and Shikun Binui

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

Diversification Opportunities for Tel Aviv and Shikun Binui

0.88

Correlation Coefficient

Tel Aviv  Shikun Binui

Very poor diversification

The 3 months correlation between Tel and Shikun is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Shikun Binui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shikun Binui 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 Shikun Binui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shikun Binui has no effect on the direction of Tel Aviv i.e., Tel Aviv and Shikun Binui go up and down completely randomly.

Pair Corralation between Tel Aviv and Shikun Binui

Assuming the 90 days trading horizon Tel Aviv is expected to generate 3.66 times less return on investment than Shikun Binui. But when comparing it to its historical volatility, Tel Aviv 35 is 3.47 times less risky than Shikun Binui. It trades about 0.36 of its potential returns per unit of risk. Shikun Binui is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  83,100  in Shikun Binui on September 13, 2024 and sell it today you would earn a total of  56,200  from holding Shikun Binui or generate 67.63% 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.  Shikun Binui

Pair Trading with Tel Aviv and Shikun Binui

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

The idea behind Tel Aviv 35 and Shikun Binui 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.