Correlation Between Razor Labs and Clal Industries

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

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

Diversification Opportunities for Razor Labs and Clal Industries

0.29

Correlation Coefficient

Razor Labs  Clal Industries

Modest diversification

The 3 months correlation between Razor and Clal is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Razor Labs and Clal Industries and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Industries and Razor Labs 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 Razor Labs are associated (or correlated) with Clal Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Industries has no effect on the direction of Razor Labs i.e., Razor Labs and Clal Industries go up and down completely randomly.

Pair Corralation between Razor Labs and Clal Industries

Assuming the 90 days trading horizon Razor Labs is expected to generate 2.53 times more return on investment than Clal Industries. However, Razor Labs is 2.53 times more volatile than Clal Industries and. It trades about 0.1 of its potential returns per unit of risk. Clal Industries and is currently generating about 0.22 per unit of risk. If you would invest  43,380  in Razor Labs on September 12, 2024 and sell it today you would earn a total of  9,030  from holding Razor Labs or generate 20.82% return on investment over 90 days.

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

Razor Labs  vs.  Clal Industries and

Razor Labs

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Razor Labs are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Razor Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Clal Industries

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Industries and are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Razor Labs and Clal Industries

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

The idea behind Razor Labs and Clal Industries and 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.