Correlation Between Castro and Clal Insurance

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

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

Diversification Opportunities for Castro and Clal Insurance

0.86

Correlation Coefficient

Castro  Clal Insurance

Very poor diversification

The 3 months correlation between Castro and Clal is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Castro and Clal Insurance Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Insurance Enter and Castro 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 Castro are associated (or correlated) with Clal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Insurance Enter has no effect on the direction of Castro i.e., Castro and Clal Insurance go up and down completely randomly.

Pair Corralation between Castro and Clal Insurance

Assuming the 90 days trading horizon Castro is expected to generate 7.01 times less return on investment than Clal Insurance. In addition to that, Castro is 1.32 times more volatile than Clal Insurance Enterprises. It trades about 0.04 of its total potential returns per unit of risk. Clal Insurance Enterprises is currently generating about 0.37 per unit of volatility. If you would invest  727,647  in Clal Insurance Enterprises on September 13, 2024 and sell it today you would earn a total of  104,217  from holding Clal Insurance Enterprises or generate 14.32% return on investment over 90 days.

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

Castro  vs.  Clal Insurance Enterprises

Castro

Risk-Adjusted Performance

18 of 100

Solid

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

Clal Insurance Enter

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castro and Clal Insurance

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

The idea behind Castro and Clal Insurance Enterprises 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.