Correlation Between Israel China and Migdal Insurance

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

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

Diversification Opportunities for Israel China and Migdal Insurance

-0.57

Correlation Coefficient

Israel China  Migdal Insurance

Excellent diversification

The 3 months correlation between Israel and Migdal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Israel China Biotechnology and Migdal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Migdal Insurance and Israel China 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 China Biotechnology are associated (or correlated) with Migdal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Migdal Insurance has no effect on the direction of Israel China i.e., Israel China and Migdal Insurance go up and down completely randomly.

Pair Corralation between Israel China and Migdal Insurance

Assuming the 90 days trading horizon Israel China Biotechnology is expected to under-perform the Migdal Insurance. In addition to that, Israel China is 2.3 times more volatile than Migdal Insurance. It trades about -0.08 of its total potential returns per unit of risk. Migdal Insurance is currently generating about 0.44 per unit of volatility. If you would invest  46,000  in Migdal Insurance on September 3, 2024 and sell it today you would earn a total of  18,690  from holding Migdal Insurance or generate 40.63% return on investment over 90 days.

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

Israel China Biotechnology  vs.  Migdal Insurance

Israel China Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Migdal Insurance

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Migdal Insurance are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Migdal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel China and Migdal Insurance

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

The idea behind Israel China Biotechnology and Migdal Insurance 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.