Correlation Between Petrochemical and Meitav Dash

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

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

Diversification Opportunities for Petrochemical and Meitav Dash

0.64

Correlation Coefficient

Petrochemical  Meitav Dash

Poor diversification

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

Pair Corralation between Petrochemical and Meitav Dash

Assuming the 90 days trading horizon Petrochemical is expected to generate 8.75 times less return on investment than Meitav Dash. But when comparing it to its historical volatility, Petrochemical is 1.02 times less risky than Meitav Dash. It trades about 0.04 of its potential returns per unit of risk. Meitav Dash Investments is currently generating about 0.33 of returns per unit of risk over similar time horizon. 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

Petrochemical  vs.  Meitav Dash Investments

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.

Meitav Dash Investments

Risk-Adjusted Performance

25 of 100

Solid

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.

Pair Trading with Petrochemical and Meitav Dash

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

The idea behind Petrochemical and Meitav Dash Investments 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.