Correlation Between AGC and Israel

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

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

Diversification Opportunities for AGC and Israel

-0.17

Correlation Coefficient

AGC  Israel

Good diversification

The 3 months correlation between AGC and Israel is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding AGC Inc ADR and Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel and AGC 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 AGC Inc ADR are associated (or correlated) with Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel has no effect on the direction of AGC i.e., AGC and Israel go up and down completely randomly.

Pair Corralation between AGC and Israel

Assuming the 90 days horizon AGC is expected to generate 25.82 times less return on investment than Israel. But when comparing it to its historical volatility, AGC Inc ADR is 2.74 times less risky than Israel. It trades about 0.0 of its potential returns per unit of risk. Israel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  52,500  in Israel on October 10, 2024 and sell it today you would lose (8,000) from holding Israel or give up 15.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.86%
Values	Daily Returns

AGC Inc ADR  vs.  Israel

AGC Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGC Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, AGC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Israel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Israel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Israel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGC and Israel

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

The idea behind AGC Inc ADR and Israel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.