Correlation Between Tel Aviv and Argo Properties

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

By analyzing existing cross correlation between Tel Aviv 35 and Argo Properties NV, you can compare the effects of market volatilities on Tel Aviv and Argo Properties 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 Tel Aviv with a short position of Argo Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Argo Properties.

Diversification Opportunities for Tel Aviv and Argo Properties

0.88

Correlation Coefficient

Tel Aviv  Argo Properties

Very poor diversification

The 3 months correlation between Tel and Argo is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Argo Properties NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Properties NV and Tel Aviv 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 Tel Aviv 35 are associated (or correlated) with Argo Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Properties NV has no effect on the direction of Tel Aviv i.e., Tel Aviv and Argo Properties go up and down completely randomly.

Pair Corralation between Tel Aviv and Argo Properties

Assuming the 90 days trading horizon Tel Aviv 35 is expected to generate 0.55 times more return on investment than Argo Properties. However, Tel Aviv 35 is 1.83 times less risky than Argo Properties. It trades about 0.21 of its potential returns per unit of risk. Argo Properties NV is currently generating about -0.1 per unit of risk. If you would invest  236,228  in Tel Aviv 35 on October 7, 2024 and sell it today you would earn a total of  5,236  from holding Tel Aviv 35 or generate 2.22% return on investment over 90 days.

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

Tel Aviv 35  vs.  Argo Properties NV

Pair Trading with Tel Aviv and Argo Properties

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

The idea behind Tel Aviv 35 and Argo Properties NV 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.