Correlation Between Tel Aviv and Compugen

Can any of the company-specific risk be diversified away by investing in both Tel Aviv and Compugen 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 Compugen 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 Compugen, you can compare the effects of market volatilities on Tel Aviv and Compugen 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 Compugen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Compugen.

Diversification Opportunities for Tel Aviv and Compugen

0.62

Correlation Coefficient

Tel Aviv  Compugen

Poor diversification

The 3 months correlation between Tel and Compugen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Compugen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugen 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 Compugen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugen has no effect on the direction of Tel Aviv i.e., Tel Aviv and Compugen go up and down completely randomly.

Pair Corralation between Tel Aviv and Compugen

Assuming the 90 days trading horizon Tel Aviv is expected to generate 1.15 times less return on investment than Compugen. But when comparing it to its historical volatility, Tel Aviv 35 is 5.32 times less risky than Compugen. It trades about 0.08 of its potential returns per unit of risk. Compugen is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  57,800  in Compugen on December 30, 2024 and sell it today you would lose (1,040) from holding Compugen or give up 1.8% of portfolio value over 90 days.

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

Tel Aviv 35  vs.  Compugen

Pair Trading with Tel Aviv and Compugen

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

The idea behind Tel Aviv 35 and Compugen 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.