Correlation Between Clal Insurance and Elron Electronic

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

Diversification Opportunities for Clal Insurance and Elron Electronic

0.79

Correlation Coefficient

Clal Insurance  Elron Electronic

Poor diversification

The 3 months correlation between Clal and Elron is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Clal Insurance Enterprises and Elron Electronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elron Electronic Ind 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 Elron Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elron Electronic Ind has no effect on the direction of Clal Insurance i.e., Clal Insurance and Elron Electronic go up and down completely randomly.

Pair Corralation between Clal Insurance and Elron Electronic

Assuming the 90 days trading horizon Clal Insurance is expected to generate 1.02 times less return on investment than Elron Electronic. In addition to that, Clal Insurance is 1.23 times more volatile than Elron Electronic Industries. It trades about 0.1 of its total potential returns per unit of risk. Elron Electronic Industries is currently generating about 0.12 per unit of volatility. If you would invest  41,210  in Elron Electronic Industries on December 29, 2024 and sell it today you would earn a total of  4,990  from holding Elron Electronic Industries or generate 12.11% 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.  Elron Electronic Industries

Clal Insurance Enter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 7 (%) 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.

Elron Electronic Ind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elron Electronic Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elron Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clal Insurance and Elron Electronic

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

The idea behind Clal Insurance Enterprises and Elron Electronic Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.