Correlation Between SP 500 and Ituran Location

Can any of the company-specific risk be diversified away by investing in both SP 500 and Ituran Location 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 SP 500 and Ituran Location into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 MINI and Ituran Location and, you can compare the effects of market volatilities on SP 500 and Ituran Location 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 SP 500 with a short position of Ituran Location. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Ituran Location.

Diversification Opportunities for SP 500 and Ituran Location

0.84

Correlation Coefficient

SP 500  Ituran Location

Very poor diversification

The 3 months correlation between XSP and Ituran is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 MINI and Ituran Location and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ituran Location and SP 500 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 SP 500 MINI are associated (or correlated) with Ituran Location. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ituran Location has no effect on the direction of SP 500 i.e., SP 500 and Ituran Location go up and down completely randomly.

Pair Corralation between SP 500 and Ituran Location

Assuming the 90 days trading horizon SP 500 is expected to generate 1.22 times less return on investment than Ituran Location. But when comparing it to its historical volatility, SP 500 MINI is 2.0 times less risky than Ituran Location. It trades about 0.1 of its potential returns per unit of risk. Ituran Location and is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,053  in Ituran Location and on October 4, 2024 and sell it today you would earn a total of  1,094  from holding Ituran Location and or generate 53.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

SP 500 MINI  vs.  Ituran Location and

Pair Trading with SP 500 and Ituran Location

The main advantage of trading using opposite SP 500 and Ituran Location positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Ituran Location 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 Ituran Location will offset losses from the drop in Ituran Location's long position.

The idea behind SP 500 MINI and Ituran Location and 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..