Correlation Between Clal Industries and Gold Bond

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

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

Diversification Opportunities for Clal Industries and Gold Bond

0.65

Correlation Coefficient

Clal Industries  Gold Bond

Poor diversification

The 3 months correlation between Clal and Gold is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Clal Industries and and The Gold Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bond and Clal Industries 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 Clal Industries and are associated (or correlated) with Gold Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bond has no effect on the direction of Clal Industries i.e., Clal Industries and Gold Bond go up and down completely randomly.

Pair Corralation between Clal Industries and Gold Bond

Assuming the 90 days trading horizon Clal Industries and is expected to generate 1.27 times more return on investment than Gold Bond. However, Clal Industries is 1.27 times more volatile than The Gold Bond. It trades about 0.18 of its potential returns per unit of risk. The Gold Bond is currently generating about 0.06 per unit of risk. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Clal Industries and  vs.  The Gold Bond

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.

Gold Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bond may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Clal Industries and Gold Bond

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

The idea behind Clal Industries and and The Gold Bond 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.