Correlation Between Clal Industries and Itay Financial

Can any of the company-specific risk be diversified away by investing in both Clal Industries and Itay Financial 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 Itay Financial 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 Itay Financial AA, you can compare the effects of market volatilities on Clal Industries and Itay Financial 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 Itay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Industries and Itay Financial.

Diversification Opportunities for Clal Industries and Itay Financial

-0.04

Correlation Coefficient

Clal Industries  Itay Financial

Good diversification

The 3 months correlation between Clal and Itay is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Clal Industries and and Itay Financial AA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itay Financial AA 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 Itay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itay Financial AA has no effect on the direction of Clal Industries i.e., Clal Industries and Itay Financial go up and down completely randomly.

Pair Corralation between Clal Industries and Itay Financial

Assuming the 90 days trading horizon Clal Industries is expected to generate 35.0 times less return on investment than Itay Financial. But when comparing it to its historical volatility, Clal Industries and is 20.49 times less risky than Itay Financial. It trades about 0.03 of its potential returns per unit of risk. Itay Financial AA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,050  in Itay Financial AA on December 2, 2024 and sell it today you would earn a total of  59,180  from holding Itay Financial AA or generate 653.92% return on investment over 90 days.

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

Clal Industries and  vs.  Itay Financial AA

Clal Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Industries and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Clal Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Itay Financial AA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itay Financial AA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Itay Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clal Industries and Itay Financial

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

The idea behind Clal Industries and and Itay Financial AA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.