Correlation Between Israel Discount and Eldav L

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

Diversification Opportunities for Israel Discount and Eldav L

0.63

Correlation Coefficient

Israel Discount  Eldav L

Poor diversification

The 3 months correlation between Israel and Eldav is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Eldav L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eldav L 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 Eldav L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eldav L has no effect on the direction of Israel Discount i.e., Israel Discount and Eldav L go up and down completely randomly.

Pair Corralation between Israel Discount and Eldav L

Assuming the 90 days trading horizon Israel Discount Bank is expected to generate 2.4 times more return on investment than Eldav L. However, Israel Discount is 2.4 times more volatile than Eldav L. It trades about 0.21 of its potential returns per unit of risk. Eldav L is currently generating about -0.31 per unit of risk. If you would invest  232,650  in Israel Discount Bank on September 18, 2024 and sell it today you would earn a total of  15,550  from holding Israel Discount Bank or generate 6.68% return on investment over 90 days.

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

Israel Discount Bank  vs.  Eldav L

Israel Discount Bank

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 26 (%) 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.

Eldav L

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eldav L has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eldav L is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Israel Discount and Eldav L

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

The idea behind Israel Discount Bank and Eldav L 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.