Correlation Between IsraelLtd and Dupont De

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

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

Diversification Opportunities for IsraelLtd and Dupont De

-0.19

Correlation Coefficient

IsraelLtd  Dupont De

Good diversification

The 3 months correlation between IsraelLtd and Dupont is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Israel and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours and IsraelLtd 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 are associated (or correlated) with Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of IsraelLtd i.e., IsraelLtd and Dupont De go up and down completely randomly.

Pair Corralation between IsraelLtd and Dupont De

Assuming the 90 days horizon Israel is expected to generate 8.3 times more return on investment than Dupont De. However, IsraelLtd is 8.3 times more volatile than Dupont De Nemours. It trades about 0.09 of its potential returns per unit of risk. Dupont De Nemours is currently generating about 0.0 per unit of risk. If you would invest  21,900  in Israel on December 27, 2024 and sell it today you would earn a total of  6,600  from holding Israel or generate 30.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Israel  vs.  Dupont De Nemours

IsraelLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Israel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, IsraelLtd reported solid returns over the last few months and may actually be approaching a breakup point.

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IsraelLtd and Dupont De

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

The idea behind Israel and Dupont De Nemours 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.