Correlation Between Mizrahi Tefahot and Nawi Brothers

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

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

Diversification Opportunities for Mizrahi Tefahot and Nawi Brothers

0.75

Correlation Coefficient

Mizrahi Tefahot  Nawi Brothers

Poor diversification

The 3 months correlation between Mizrahi and Nawi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mizrahi Tefahot and Nawi Brothers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nawi Brothers Group and Mizrahi Tefahot 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 Mizrahi Tefahot are associated (or correlated) with Nawi Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nawi Brothers Group has no effect on the direction of Mizrahi Tefahot i.e., Mizrahi Tefahot and Nawi Brothers go up and down completely randomly.

Pair Corralation between Mizrahi Tefahot and Nawi Brothers

Assuming the 90 days trading horizon Mizrahi Tefahot is expected to generate 2.86 times less return on investment than Nawi Brothers. But when comparing it to its historical volatility, Mizrahi Tefahot is 2.08 times less risky than Nawi Brothers. It trades about 0.12 of its potential returns per unit of risk. Nawi Brothers Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  387,000  in Nawi Brothers Group on December 30, 2024 and sell it today you would earn a total of  96,800  from holding Nawi Brothers Group or generate 25.01% return on investment over 90 days.

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

Mizrahi Tefahot  vs.  Nawi Brothers Group

Mizrahi Tefahot

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mizrahi Tefahot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mizrahi Tefahot may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nawi Brothers Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nawi Brothers Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nawi Brothers sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mizrahi Tefahot and Nawi Brothers

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

The idea behind Mizrahi Tefahot and Nawi Brothers Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.