Correlation Between Israel Land and Lapidoth

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

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

Diversification Opportunities for Israel Land and Lapidoth

-0.23

Correlation Coefficient

Israel Land  Lapidoth

Very good diversification

The 3 months correlation between Israel and Lapidoth is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Israel Land Development and Lapidoth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lapidoth and Israel Land 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 Land Development are associated (or correlated) with Lapidoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lapidoth has no effect on the direction of Israel Land i.e., Israel Land and Lapidoth go up and down completely randomly.

Pair Corralation between Israel Land and Lapidoth

Assuming the 90 days trading horizon Israel Land Development is expected to under-perform the Lapidoth. But the stock apears to be less risky and, when comparing its historical volatility, Israel Land Development is 1.41 times less risky than Lapidoth. The stock trades about -0.35 of its potential returns per unit of risk. The Lapidoth is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  761,100  in Lapidoth on November 28, 2024 and sell it today you would lose (20,600) from holding Lapidoth or give up 2.71% of portfolio value over 90 days.

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

Israel Land Development  vs.  Lapidoth

Israel Land Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Israel Land Development 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 basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lapidoth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lapidoth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lapidoth sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel Land and Lapidoth

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

The idea behind Israel Land Development and Lapidoth 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.