Correlation Between Cellcom Israel and Nextcom

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

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

Diversification Opportunities for Cellcom Israel and Nextcom

-0.54

Correlation Coefficient

Cellcom Israel  Nextcom

Excellent diversification

The 3 months correlation between Cellcom and Nextcom is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cellcom Israel and Nextcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextcom and Cellcom Israel 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 Cellcom Israel are associated (or correlated) with Nextcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextcom has no effect on the direction of Cellcom Israel i.e., Cellcom Israel and Nextcom go up and down completely randomly.

Pair Corralation between Cellcom Israel and Nextcom

Assuming the 90 days trading horizon Cellcom Israel is expected to generate 1.11 times more return on investment than Nextcom. However, Cellcom Israel is 1.11 times more volatile than Nextcom. It trades about 0.22 of its potential returns per unit of risk. Nextcom is currently generating about -0.03 per unit of risk. If you would invest  155,500  in Cellcom Israel on September 3, 2024 and sell it today you would earn a total of  39,800  from holding Cellcom Israel or generate 25.59% return on investment over 90 days.

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

Cellcom Israel  vs.  Nextcom

Cellcom Israel

Risk-Adjusted Performance

17 of 100

Solid

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

Nextcom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextcom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nextcom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cellcom Israel and Nextcom

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

The idea behind Cellcom Israel and Nextcom 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.