Correlation Between Israel China and Netz Hotels

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

Diversification Opportunities for Israel China and Netz Hotels

0.11

Correlation Coefficient

Israel China  Netz Hotels

Average diversification

The 3 months correlation between Israel and Netz is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Israel China Biotechnology and Netz Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netz Hotels 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 Netz Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netz Hotels has no effect on the direction of Israel China i.e., Israel China and Netz Hotels go up and down completely randomly.

Pair Corralation between Israel China and Netz Hotels

Assuming the 90 days trading horizon Israel China Biotechnology is expected to generate 5.66 times more return on investment than Netz Hotels. However, Israel China is 5.66 times more volatile than Netz Hotels. It trades about 0.06 of its potential returns per unit of risk. Netz Hotels is currently generating about 0.02 per unit of risk. If you would invest  11,540  in Israel China Biotechnology on September 4, 2024 and sell it today you would earn a total of  45,860  from holding Israel China Biotechnology or generate 397.4% return on investment over 90 days.

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

Israel China Biotechnology  vs.  Netz Hotels

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.

Netz Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netz Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Netz Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel China and Netz Hotels

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

The idea behind Israel China Biotechnology and Netz Hotels 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.