Correlation Between Israel Opportunity and Israel Land

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

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

Diversification Opportunities for Israel Opportunity and Israel Land

-0.53

Correlation Coefficient

Israel Opportunity  Israel Land

Excellent diversification

The 3 months correlation between Israel and Israel is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Israel Opportunity and Israel Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Land Development and Israel Opportunity 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 Opportunity are associated (or correlated) with Israel Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Land Development has no effect on the direction of Israel Opportunity i.e., Israel Opportunity and Israel Land go up and down completely randomly.

Pair Corralation between Israel Opportunity and Israel Land

Assuming the 90 days trading horizon Israel Opportunity is expected to generate 4.14 times more return on investment than Israel Land. However, Israel Opportunity is 4.14 times more volatile than Israel Land Development. It trades about 0.12 of its potential returns per unit of risk. Israel Land Development is currently generating about -0.19 per unit of risk. If you would invest  7,320  in Israel Opportunity on November 28, 2024 and sell it today you would earn a total of  2,680  from holding Israel Opportunity or generate 36.61% return on investment over 90 days.

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

Israel Opportunity   vs.  Israel Land Development

Israel Opportunity

Risk-Adjusted Performance

OK

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

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.

Pair Trading with Israel Opportunity and Israel Land

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

The idea behind Israel Opportunity and Israel Land Development 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.