Correlation Between Amot Investments and Israel Discount

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

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

Diversification Opportunities for Amot Investments and Israel Discount

0.72

Correlation Coefficient

Amot Investments  Israel Discount

Poor diversification

The 3 months correlation between Amot and Israel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Amot Investments 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 Amot Investments 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 Amot Investments 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 Amot Investments i.e., Amot Investments and Israel Discount go up and down completely randomly.

Pair Corralation between Amot Investments and Israel Discount

Assuming the 90 days trading horizon Amot Investments is expected to under-perform the Israel Discount. But the stock apears to be less risky and, when comparing its historical volatility, Amot Investments is 1.05 times less risky than Israel Discount. The stock trades about -0.02 of its potential returns per unit of risk. The Israel Discount Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  244,400  in Israel Discount Bank on November 29, 2024 and sell it today you would earn a total of  31,000  from holding Israel Discount Bank or generate 12.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.0%
Values	Daily Returns

Amot Investments  vs.  Israel Discount Bank

Amot Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amot Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amot Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Israel Discount Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 12 (%) 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 Amot Investments and Israel Discount

The main advantage of trading using opposite Amot Investments and Israel Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amot Investments 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 Amot Investments 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.