Correlation Between Overseas Commerce and Israel China

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

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

Diversification Opportunities for Overseas Commerce and Israel China

0.34

Correlation Coefficient

Overseas Commerce  Israel China

Weak diversification

The 3 months correlation between Overseas and Israel is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Overseas Commerce and Israel China Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel China Biotech and Overseas Commerce 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 Overseas Commerce are associated (or correlated) with Israel China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel China Biotech has no effect on the direction of Overseas Commerce i.e., Overseas Commerce and Israel China go up and down completely randomly.

Pair Corralation between Overseas Commerce and Israel China

Assuming the 90 days trading horizon Overseas Commerce is expected to generate 0.21 times more return on investment than Israel China. However, Overseas Commerce is 4.84 times less risky than Israel China. It trades about 0.16 of its potential returns per unit of risk. Israel China Biotechnology is currently generating about -0.02 per unit of risk. If you would invest  39,670  in Overseas Commerce on December 30, 2024 and sell it today you would earn a total of  4,690  from holding Overseas Commerce or generate 11.82% return on investment over 90 days.

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

Overseas Commerce  vs.  Israel China Biotechnology

Overseas Commerce

Risk-Adjusted Performance

Good

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

Israel China Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers 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 Overseas Commerce and Israel China

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

The idea behind Overseas Commerce and Israel China Biotechnology 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.