Correlation Between Tel Aviv and Intelicanna

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

Diversification Opportunities for Tel Aviv and Intelicanna

0.27

Correlation Coefficient

Tel Aviv  Intelicanna

Modest diversification

The 3 months correlation between Tel and Intelicanna is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Intelicanna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intelicanna 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 Intelicanna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intelicanna has no effect on the direction of Tel Aviv i.e., Tel Aviv and Intelicanna go up and down completely randomly.

Pair Corralation between Tel Aviv and Intelicanna

Assuming the 90 days trading horizon Tel Aviv is expected to generate 2.19 times less return on investment than Intelicanna. But when comparing it to its historical volatility, Tel Aviv 35 is 6.49 times less risky than Intelicanna. It trades about 0.26 of its potential returns per unit of risk. Intelicanna is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,500  in Intelicanna on September 5, 2024 and sell it today you would earn a total of  1,000.00  from holding Intelicanna or generate 18.18% return on investment over 90 days.

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

Tel Aviv 35  vs.  Intelicanna

Pair Trading with Tel Aviv and Intelicanna

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

The idea behind Tel Aviv 35 and Intelicanna 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.