Correlation Between Israel Discount and Azrieli

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

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

Diversification Opportunities for Israel Discount and Azrieli

0.47

Correlation Coefficient

Israel Discount  Azrieli

Very weak diversification

The 3 months correlation between Israel and Azrieli is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Azrieli Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azrieli Group and Israel Discount 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 Israel Discount Bank are associated (or correlated) with Azrieli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azrieli Group has no effect on the direction of Israel Discount i.e., Israel Discount and Azrieli go up and down completely randomly.

Pair Corralation between Israel Discount and Azrieli

Assuming the 90 days trading horizon Israel Discount Bank is expected to generate 0.92 times more return on investment than Azrieli. However, Israel Discount Bank is 1.09 times less risky than Azrieli. It trades about 0.09 of its potential returns per unit of risk. Azrieli Group is currently generating about 0.05 per unit of risk. If you would invest  160,183  in Israel Discount Bank on November 28, 2024 and sell it today you would earn a total of  115,717  from holding Israel Discount Bank or generate 72.24% return on investment over 90 days.

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

Israel Discount Bank  vs.  Azrieli Group

Israel Discount Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Discount sustained solid returns over the last few months and may actually be approaching a breakup point.

Azrieli Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azrieli Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Israel Discount and Azrieli

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

The idea behind Israel Discount Bank and Azrieli Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.