Correlation Between Gilat Telecom and Israel Opportunity

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

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

Diversification Opportunities for Gilat Telecom and Israel Opportunity

0.3

Correlation Coefficient

Gilat Telecom  Israel Opportunity

Weak diversification

The 3 months correlation between Gilat and Israel is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gilat Telecom Global and Israel Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Opportunity and Gilat Telecom 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 Gilat Telecom Global are associated (or correlated) with Israel Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Opportunity has no effect on the direction of Gilat Telecom i.e., Gilat Telecom and Israel Opportunity go up and down completely randomly.

Pair Corralation between Gilat Telecom and Israel Opportunity

Assuming the 90 days trading horizon Gilat Telecom Global is expected to generate 0.95 times more return on investment than Israel Opportunity. However, Gilat Telecom Global is 1.05 times less risky than Israel Opportunity. It trades about 0.19 of its potential returns per unit of risk. Israel Opportunity is currently generating about -0.03 per unit of risk. If you would invest  5,480  in Gilat Telecom Global on September 12, 2024 and sell it today you would earn a total of  1,500  from holding Gilat Telecom Global or generate 27.37% return on investment over 90 days.

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

Gilat Telecom Global  vs.  Israel Opportunity

Gilat Telecom Global

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Telecom Global are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gilat Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Israel Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Israel Opportunity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gilat Telecom and Israel Opportunity

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

The idea behind Gilat Telecom Global and Israel Opportunity 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.