Correlation Between Brimag L and Israel Corp

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

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

Diversification Opportunities for Brimag L and Israel Corp

0.9

Correlation Coefficient

Brimag L  Israel Corp

Almost no diversification

The 3 months correlation between Brimag and Israel is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Brimag L and Israel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Corp and Brimag L 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 Brimag L are associated (or correlated) with Israel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Corp has no effect on the direction of Brimag L i.e., Brimag L and Israel Corp go up and down completely randomly.

Pair Corralation between Brimag L and Israel Corp

Assuming the 90 days trading horizon Brimag L is expected to generate 1.5 times more return on investment than Israel Corp. However, Brimag L is 1.5 times more volatile than Israel Corp. It trades about 0.01 of its potential returns per unit of risk. Israel Corp is currently generating about -0.01 per unit of risk. If you would invest  205,117  in Brimag L on October 10, 2024 and sell it today you would lose (34,017) from holding Brimag L or give up 16.58% of portfolio value over 90 days.

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

Brimag L  vs.  Israel Corp

Brimag L

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brimag L are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brimag L sustained solid returns over the last few months and may actually be approaching a breakup point.

Israel Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brimag L and Israel Corp

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

The idea behind Brimag L and Israel Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.