Correlation Between Israel Land and Libra Insurance

Can any of the company-specific risk be diversified away by investing in both Israel Land and Libra 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 Land and Libra Insurance 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 Libra Insurance, you can compare the effects of market volatilities on Israel Land and Libra 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 Land with a short position of Libra Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Land and Libra Insurance.

Diversification Opportunities for Israel Land and Libra Insurance

-0.64

Correlation Coefficient

Israel Land  Libra Insurance

Excellent diversification

The 3 months correlation between Israel and Libra is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Israel Land Development and Libra Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Libra Insurance 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 Libra Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Libra Insurance has no effect on the direction of Israel Land i.e., Israel Land and Libra Insurance go up and down completely randomly.

Pair Corralation between Israel Land and Libra Insurance

Assuming the 90 days trading horizon Israel Land Development is expected to under-perform the Libra Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Israel Land Development is 1.78 times less risky than Libra Insurance. The stock trades about -0.09 of its potential returns per unit of risk. The Libra Insurance is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  105,900  in Libra Insurance on December 30, 2024 and sell it today you would earn a total of  32,200  from holding Libra Insurance or generate 30.41% return on investment over 90 days.

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

Israel Land Development  vs.  Libra Insurance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Libra Insurance

Risk-Adjusted Performance

Good

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

Pair Trading with Israel Land and Libra Insurance

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

The idea behind Israel Land Development and Libra 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.