Correlation Between El Al and Aluminumof China

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

By analyzing existing cross correlation between El Al Israel and Aluminum of, you can compare the effects of market volatilities on El Al and Aluminumof China 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 El Al with a short position of Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Al and Aluminumof China.

Diversification Opportunities for El Al and Aluminumof China

0.47

Correlation Coefficient

El Al  Aluminumof China

Very weak diversification

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

Pair Corralation between El Al and Aluminumof China

Assuming the 90 days horizon El Al Israel is expected to generate 0.96 times more return on investment than Aluminumof China. However, El Al Israel is 1.04 times less risky than Aluminumof China. It trades about 0.18 of its potential returns per unit of risk. Aluminum of is currently generating about 0.13 per unit of risk. If you would invest  225.00  in El Al Israel on December 21, 2024 and sell it today you would earn a total of  75.00  from holding El Al Israel or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

El Al Israel  vs.  Aluminum of

El Al Israel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in El Al Israel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, El Al reported solid returns over the last few months and may actually be approaching a breakup point.

Aluminumof China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Al and Aluminumof China

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

The idea behind El Al Israel and Aluminum of 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.