Correlation Between Bezeq Israeli and Danel

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

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

Diversification Opportunities for Bezeq Israeli and Danel

0.82

Correlation Coefficient

Bezeq Israeli  Danel

Very poor diversification

The 3 months correlation between Bezeq and Danel is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bezeq Israeli Telecommunicatio and Danel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danel and Bezeq Israeli 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 Bezeq Israeli Telecommunication are associated (or correlated) with Danel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danel has no effect on the direction of Bezeq Israeli i.e., Bezeq Israeli and Danel go up and down completely randomly.

Pair Corralation between Bezeq Israeli and Danel

Assuming the 90 days trading horizon Bezeq Israeli Telecommunication is expected to generate 0.9 times more return on investment than Danel. However, Bezeq Israeli Telecommunication is 1.11 times less risky than Danel. It trades about 0.19 of its potential returns per unit of risk. Danel is currently generating about 0.09 per unit of risk. If you would invest  52,140  in Bezeq Israeli Telecommunication on November 28, 2024 and sell it today you would earn a total of  7,400  from holding Bezeq Israeli Telecommunication or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.04%
Values	Daily Returns

Bezeq Israeli Telecommunicatio  vs.  Danel

Bezeq Israeli Teleco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bezeq Israeli Telecommunication are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bezeq Israeli sustained solid returns over the last few months and may actually be approaching a breakup point.

Danel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Danel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Bezeq Israeli and Danel

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

The idea behind Bezeq Israeli Telecommunication and Danel 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.