Correlation Between Big Tech and Clal Industries

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

By analyzing existing cross correlation between Big Tech 50 and Clal Industries and, you can compare the effects of market volatilities on Big Tech and Clal 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 Big Tech with a short position of Clal Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tech and Clal Industries.

Diversification Opportunities for Big Tech and Clal Industries

-0.4

Correlation Coefficient

Big Tech  Clal Industries

Very good diversification

The 3 months correlation between Big and Clal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Big Tech 50 and Clal Industries and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Industries and Big Tech 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 Big Tech 50 are associated (or correlated) with Clal Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Industries has no effect on the direction of Big Tech i.e., Big Tech and Clal Industries go up and down completely randomly.

Pair Corralation between Big Tech and Clal Industries

Assuming the 90 days trading horizon Big Tech 50 is expected to under-perform the Clal Industries. But the stock apears to be less risky and, when comparing its historical volatility, Big Tech 50 is 1.25 times less risky than Clal Industries. The stock trades about -0.15 of its potential returns per unit of risk. The Clal Industries and is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  180,100  in Clal Industries and on September 3, 2024 and sell it today you would earn a total of  37,800  from holding Clal Industries and or generate 20.99% return on investment over 90 days.

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

Big Tech 50  vs.  Clal Industries and

Big Tech 50

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Tech 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Clal Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Industries and are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Tech and Clal Industries

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

The idea behind Big Tech 50 and Clal Industries and 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..