Correlation Between Tel Aviv and Creative Media

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

Diversification Opportunities for Tel Aviv and Creative Media

-0.89

Correlation Coefficient

Tel Aviv  Creative Media

Pay attention - limited upside

The 3 months correlation between Tel and Creative is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Creative Media Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Creative Media Community 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 Creative Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Creative Media Community has no effect on the direction of Tel Aviv i.e., Tel Aviv and Creative Media go up and down completely randomly.

Pair Corralation between Tel Aviv and Creative Media

Assuming the 90 days trading horizon Tel Aviv 35 is expected to generate 0.09 times more return on investment than Creative Media. However, Tel Aviv 35 is 11.48 times less risky than Creative Media. It trades about 0.17 of its potential returns per unit of risk. Creative Media Community is currently generating about -0.34 per unit of risk. If you would invest  209,177  in Tel Aviv 35 on August 31, 2024 and sell it today you would earn a total of  16,872  from holding Tel Aviv 35 or generate 8.07% return on investment over 90 days.

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

Tel Aviv 35  vs.  Creative Media Community

Pair Trading with Tel Aviv and Creative Media

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

The idea behind Tel Aviv 35 and Creative Media Community 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.