Correlation Between Norstar and Isras Investment

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

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

Diversification Opportunities for Norstar and Isras Investment

0.78

Correlation Coefficient

Norstar  Isras Investment

Poor diversification

The 3 months correlation between Norstar and Isras is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Norstar and Isras Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isras Investment and Norstar 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 Norstar are associated (or correlated) with Isras Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isras Investment has no effect on the direction of Norstar i.e., Norstar and Isras Investment go up and down completely randomly.

Pair Corralation between Norstar and Isras Investment

Assuming the 90 days trading horizon Norstar is expected to under-perform the Isras Investment. In addition to that, Norstar is 1.53 times more volatile than Isras Investment. It trades about -0.2 of its total potential returns per unit of risk. Isras Investment is currently generating about -0.07 per unit of volatility. If you would invest  8,590,000  in Isras Investment on December 28, 2024 and sell it today you would lose (590,000) from holding Isras Investment or give up 6.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.08%
Values	Daily Returns

Norstar  vs.  Isras Investment

Norstar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norstar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Isras Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Isras Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Norstar and Isras Investment

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

The idea behind Norstar and Isras Investment 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.