Correlation Between Israel Discount and EN Shoham

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

Diversification Opportunities for Israel Discount and EN Shoham

IsraelSHOMDiversified AwayIsraelSHOMDiversified Away100%
0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Israel and SHOM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and EN Shoham Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EN Shoham Business 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 EN Shoham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EN Shoham Business has no effect on the direction of Israel Discount i.e., Israel Discount and EN Shoham go up and down completely randomly.

Pair Corralation between Israel Discount and EN Shoham

Assuming the 90 days trading horizon Israel Discount is expected to generate 1.46 times less return on investment than EN Shoham. But when comparing it to its historical volatility, Israel Discount Bank is 1.03 times less risky than EN Shoham. It trades about 0.31 of its potential returns per unit of risk. EN Shoham Business is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  52,563  in EN Shoham Business on September 15, 2024 and sell it today you would earn a total of  22,237  from holding EN Shoham Business or generate 42.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Israel Discount Bank  vs.  EN Shoham Business

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 010203040
JavaScript chart by amCharts 3.21.15DSCT SHOM
       Timeline  
Israel Discount Bank 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 24 (%) 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.
JavaScript chart by amCharts 3.21.15SepOctNovDecOctNovDec1,9002,0002,1002,2002,3002,4002,500
EN Shoham Business 

Risk-Adjusted Performance

34 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in EN Shoham Business are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EN Shoham sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15SepOctNovDecOctNovDec500550600650700750

Israel Discount and EN Shoham Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.93-3.69-2.45-1.220.01.372.764.145.53 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15DSCT SHOM
       Returns  

Pair Trading with Israel Discount and EN Shoham

The main advantage of trading using opposite Israel Discount and EN Shoham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Discount position performs unexpectedly, EN Shoham 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 EN Shoham will offset losses from the drop in EN Shoham's long position.
The idea behind Israel Discount Bank and EN Shoham Business 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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