Correlation Between Bezeq Israeli and Shemen Industries

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

Diversification Opportunities for Bezeq Israeli and Shemen Industries

0.74

Correlation Coefficient

Bezeq Israeli  Shemen Industries

Poor diversification

The 3 months correlation between Bezeq and Shemen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bezeq Israeli Telecommunicatio and Shemen Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shemen Industries 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 Shemen Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shemen Industries has no effect on the direction of Bezeq Israeli i.e., Bezeq Israeli and Shemen Industries go up and down completely randomly.

Pair Corralation between Bezeq Israeli and Shemen Industries

Assuming the 90 days trading horizon Bezeq Israeli Telecommunication is expected to generate 1.3 times more return on investment than Shemen Industries. However, Bezeq Israeli is 1.3 times more volatile than Shemen Industries. It trades about 0.13 of its potential returns per unit of risk. Shemen Industries is currently generating about 0.14 per unit of risk. If you would invest  53,500  in Bezeq Israeli Telecommunication on October 9, 2024 and sell it today you would earn a total of  1,560  from holding Bezeq Israeli Telecommunication or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Bezeq Israeli Telecommunicatio  vs.  Shemen Industries

Bezeq Israeli Teleco

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bezeq Israeli Telecommunication are ranked lower than 24 (%) 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.

Shemen Industries

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shemen Industries are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Shemen Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bezeq Israeli and Shemen Industries

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

The idea behind Bezeq Israeli Telecommunication and Shemen Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.