Correlation Between Meitav Dash and Petrochemical

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

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

Diversification Opportunities for Meitav Dash and Petrochemical

0.64

Correlation Coefficient

Meitav Dash  Petrochemical

Poor diversification

The 3 months correlation between Meitav and Petrochemical is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Meitav Dash Investments and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and Meitav Dash 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 Meitav Dash Investments are associated (or correlated) with Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of Meitav Dash i.e., Meitav Dash and Petrochemical go up and down completely randomly.

Pair Corralation between Meitav Dash and Petrochemical

Assuming the 90 days trading horizon Meitav Dash Investments is expected to generate 1.02 times more return on investment than Petrochemical. However, Meitav Dash is 1.02 times more volatile than Petrochemical. It trades about 0.33 of its potential returns per unit of risk. Petrochemical is currently generating about 0.04 per unit of risk. If you would invest  187,800  in Meitav Dash Investments on September 5, 2024 and sell it today you would earn a total of  86,100  from holding Meitav Dash Investments or generate 45.85% return on investment over 90 days.

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

Meitav Dash Investments  vs.  Petrochemical

Meitav Dash Investments

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Meitav Dash Investments are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Meitav Dash sustained solid returns over the last few months and may actually be approaching a breakup point.

Petrochemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petrochemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Petrochemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Meitav Dash and Petrochemical

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

The idea behind Meitav Dash Investments and Petrochemical 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.