Correlation Between Azrieli and Castro

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

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

Diversification Opportunities for Azrieli and Castro

0.32

Correlation Coefficient

Azrieli  Castro

Weak diversification

The 3 months correlation between Azrieli and Castro is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Azrieli Group and Castro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castro and Azrieli 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 Azrieli Group are associated (or correlated) with Castro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castro has no effect on the direction of Azrieli i.e., Azrieli and Castro go up and down completely randomly.

Pair Corralation between Azrieli and Castro

Assuming the 90 days trading horizon Azrieli Group is expected to under-perform the Castro. But the stock apears to be less risky and, when comparing its historical volatility, Azrieli Group is 1.19 times less risky than Castro. The stock trades about -0.12 of its potential returns per unit of risk. The Castro is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,072,000  in Castro on December 2, 2024 and sell it today you would earn a total of  161,000  from holding Castro or generate 15.02% return on investment over 90 days.

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

Azrieli Group  vs.  Castro

Azrieli Group

Risk-Adjusted Performance

Very Weak

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

Castro

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Castro are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Castro sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azrieli and Castro

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

The idea behind Azrieli Group and Castro 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.