Correlation Between Bezeq Israeli and Shufersal

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

Diversification Opportunities for Bezeq Israeli and Shufersal

0.47

Correlation Coefficient

Bezeq Israeli  Shufersal

Very weak diversification

The 3 months correlation between Bezeq and Shufersal is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bezeq Israeli Telecommunicatio and Shufersal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shufersal 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 Shufersal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shufersal has no effect on the direction of Bezeq Israeli i.e., Bezeq Israeli and Shufersal go up and down completely randomly.

Pair Corralation between Bezeq Israeli and Shufersal

Assuming the 90 days trading horizon Bezeq Israeli Telecommunication is expected to generate 1.04 times more return on investment than Shufersal. However, Bezeq Israeli is 1.04 times more volatile than Shufersal. It trades about 0.19 of its potential returns per unit of risk. Shufersal is currently generating about 0.06 per unit of risk. If you would invest  52,240  in Bezeq Israeli Telecommunication on November 29, 2024 and sell it today you would earn a total of  7,300  from holding Bezeq Israeli Telecommunication or generate 13.97% return on investment over 90 days.

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

Bezeq Israeli Telecommunicatio  vs.  Shufersal

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.

Shufersal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shufersal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Shufersal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bezeq Israeli and Shufersal

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

The idea behind Bezeq Israeli Telecommunication and Shufersal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.