Correlation Between Isracard and OPC Energy

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

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

Diversification Opportunities for Isracard and OPC Energy

0.78

Correlation Coefficient

Isracard  OPC Energy

Poor diversification

The 3 months correlation between Isracard and OPC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Isracard and OPC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPC Energy and Isracard 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 Isracard are associated (or correlated) with OPC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPC Energy has no effect on the direction of Isracard i.e., Isracard and OPC Energy go up and down completely randomly.

Pair Corralation between Isracard and OPC Energy

Assuming the 90 days trading horizon Isracard is expected to generate 2.98 times less return on investment than OPC Energy. But when comparing it to its historical volatility, Isracard is 2.32 times less risky than OPC Energy. It trades about 0.09 of its potential returns per unit of risk. OPC Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  293,100  in OPC Energy on December 30, 2024 and sell it today you would earn a total of  38,300  from holding OPC Energy or generate 13.07% return on investment over 90 days.

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

Isracard  vs.  OPC Energy

Isracard

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Isracard are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Isracard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

OPC Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OPC Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, OPC Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Isracard and OPC Energy

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

The idea behind Isracard and OPC Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.