Correlation Between Clal Insurance and El Mor

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

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

Diversification Opportunities for Clal Insurance and El Mor

0.75

Correlation Coefficient

Clal Insurance  El Mor

Poor diversification

The 3 months correlation between Clal and ELMR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Clal Insurance Enterprises and El Mor Electric Installation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Mor Electric and Clal Insurance 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 Insurance Enterprises are associated (or correlated) with El Mor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Mor Electric has no effect on the direction of Clal Insurance i.e., Clal Insurance and El Mor go up and down completely randomly.

Pair Corralation between Clal Insurance and El Mor

Assuming the 90 days trading horizon Clal Insurance Enterprises is expected to generate 1.22 times more return on investment than El Mor. However, Clal Insurance is 1.22 times more volatile than El Mor Electric Installation. It trades about 0.06 of its potential returns per unit of risk. El Mor Electric Installation is currently generating about 0.04 per unit of risk. If you would invest  569,800  in Clal Insurance Enterprises on September 1, 2024 and sell it today you would earn a total of  201,400  from holding Clal Insurance Enterprises or generate 35.35% return on investment over 90 days.

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

Clal Insurance Enterprises  vs.  El Mor Electric Installation

Clal Insurance Enter

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 23 (%) 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.

El Mor Electric

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Clal Insurance and El Mor

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

The idea behind Clal Insurance Enterprises and El Mor Electric Installation 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .