Correlation Between Tel Aviv and Satcom Systems

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

Diversification Opportunities for Tel Aviv and Satcom Systems

0.91

Correlation Coefficient

Tel Aviv  Satcom Systems

Almost no diversification

The 3 months correlation between Tel and Satcom is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Satcom Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satcom Systems 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 Satcom Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satcom Systems has no effect on the direction of Tel Aviv i.e., Tel Aviv and Satcom Systems go up and down completely randomly.

Pair Corralation between Tel Aviv and Satcom Systems

Assuming the 90 days trading horizon Tel Aviv is expected to generate 2.65 times less return on investment than Satcom Systems. But when comparing it to its historical volatility, Tel Aviv 35 is 3.67 times less risky than Satcom Systems. It trades about 0.31 of its potential returns per unit of risk. Satcom Systems is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,580  in Satcom Systems on September 27, 2024 and sell it today you would earn a total of  1,950  from holding Satcom Systems or generate 34.95% return on investment over 90 days.

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

Tel Aviv 35  vs.  Satcom Systems

Pair Trading with Tel Aviv and Satcom Systems

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

The idea behind Tel Aviv 35 and Satcom Systems 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.