Correlation Between Peninsula and Israel Discount

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

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

Diversification Opportunities for Peninsula and Israel Discount

0.96

Correlation Coefficient

Peninsula  Israel Discount

Almost no diversification

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

Pair Corralation between Peninsula and Israel Discount

Assuming the 90 days trading horizon Peninsula Group is expected to generate 1.15 times more return on investment than Israel Discount. However, Peninsula is 1.15 times more volatile than Israel Discount Bank. It trades about 0.34 of its potential returns per unit of risk. Israel Discount Bank is currently generating about 0.26 per unit of risk. If you would invest  15,654  in Peninsula Group on September 5, 2024 and sell it today you would earn a total of  5,196  from holding Peninsula Group or generate 33.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.83%
Values	Daily Returns

Peninsula Group  vs.  Israel Discount Bank

Peninsula Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Peninsula sustained solid returns over the last few months and may actually be approaching a breakup point.

Israel Discount Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Discount sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peninsula and Israel Discount

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

The idea behind Peninsula Group and Israel Discount Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.