Correlation Between Israel Canada and Aura Investments

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

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

Diversification Opportunities for Israel Canada and Aura Investments

0.5

Correlation Coefficient

Israel Canada  Aura Investments

Very weak diversification

The 3 months correlation between Israel and Aura is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Israel Canada and Aura Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Investments and Israel Canada 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 Canada are associated (or correlated) with Aura Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Investments has no effect on the direction of Israel Canada i.e., Israel Canada and Aura Investments go up and down completely randomly.

Pair Corralation between Israel Canada and Aura Investments

Assuming the 90 days trading horizon Israel Canada is expected to generate 0.79 times more return on investment than Aura Investments. However, Israel Canada is 1.27 times less risky than Aura Investments. It trades about -0.22 of its potential returns per unit of risk. Aura Investments is currently generating about -0.21 per unit of risk. If you would invest  155,000  in Israel Canada on November 29, 2024 and sell it today you would lose (11,500) from holding Israel Canada or give up 7.42% of portfolio value over 90 days.

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

Israel Canada  vs.  Aura Investments

Israel Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Israel Canada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Israel Canada is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aura Investments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel Canada and Aura Investments

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

The idea behind Israel Canada and Aura Investments 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.