Correlation Between Migdal Insurance and Discount Investment

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

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

Diversification Opportunities for Migdal Insurance and Discount Investment

0.96

Correlation Coefficient

Migdal Insurance  Discount Investment

Almost no diversification

The 3 months correlation between Migdal and Discount is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Migdal Insurance and Discount Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discount Investment Corp and Migdal Insurance 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 Migdal Insurance are associated (or correlated) with Discount Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discount Investment Corp has no effect on the direction of Migdal Insurance i.e., Migdal Insurance and Discount Investment go up and down completely randomly.

Pair Corralation between Migdal Insurance and Discount Investment

Assuming the 90 days trading horizon Migdal Insurance is expected to generate 0.61 times more return on investment than Discount Investment. However, Migdal Insurance is 1.64 times less risky than Discount Investment. It trades about 0.44 of its potential returns per unit of risk. Discount Investment Corp is currently generating about 0.27 per unit of risk. If you would invest  46,000  in Migdal Insurance on September 3, 2024 and sell it today you would earn a total of  18,690  from holding Migdal Insurance or generate 40.63% return on investment over 90 days.

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

Migdal Insurance  vs.  Discount Investment Corp

Migdal Insurance

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Migdal Insurance are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Migdal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Discount Investment Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discount Investment Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Discount Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Migdal Insurance and Discount Investment

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

The idea behind Migdal Insurance and Discount Investment Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.