Correlation Between Tel Aviv and Matrix

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

Diversification Opportunities for Tel Aviv and Matrix

0.62

Correlation Coefficient

Tel Aviv  Matrix

Poor diversification

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

Pair Corralation between Tel Aviv and Matrix

Assuming the 90 days trading horizon Tel Aviv is expected to generate 1.72 times less return on investment than Matrix. But when comparing it to its historical volatility, Tel Aviv 35 is 1.76 times less risky than Matrix. It trades about 0.08 of its potential returns per unit of risk. Matrix is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  829,090  in Matrix on December 30, 2024 and sell it today you would earn a total of  54,810  from holding Matrix or generate 6.61% return on investment over 90 days.

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

Tel Aviv 35  vs.  Matrix

Pair Trading with Tel Aviv and Matrix

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

The idea behind Tel Aviv 35 and Matrix 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.