Correlation Between Israel Discount and Hadasit Bio

Can any of the company-specific risk be diversified away by investing in both Israel Discount and Hadasit Bio 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 Israel Discount and Hadasit Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Israel Discount Bank and Hadasit Bio, you can compare the effects of market volatilities on Israel Discount and Hadasit Bio 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 Israel Discount with a short position of Hadasit Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and Hadasit Bio.

Diversification Opportunities for Israel Discount and Hadasit Bio

-0.47

Correlation Coefficient

Israel Discount  Hadasit Bio

Very good diversification

The 3 months correlation between Israel and Hadasit is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and Hadasit Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hadasit Bio and Israel Discount 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 Israel Discount Bank are associated (or correlated) with Hadasit Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hadasit Bio has no effect on the direction of Israel Discount i.e., Israel Discount and Hadasit Bio go up and down completely randomly.

Pair Corralation between Israel Discount and Hadasit Bio

Assuming the 90 days trading horizon Israel Discount Bank is expected to generate 0.46 times more return on investment than Hadasit Bio. However, Israel Discount Bank is 2.18 times less risky than Hadasit Bio. It trades about 0.03 of its potential returns per unit of risk. Hadasit Bio is currently generating about -0.21 per unit of risk. If you would invest  187,900  in Israel Discount Bank on February 3, 2024 and sell it today you would earn a total of  1,100  from holding Israel Discount Bank or generate 0.59% return on investment over 90 days.

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

Israel Discount Bank  vs.  Hadasit Bio

Israel Discount Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Discount sustained solid returns over the last few months and may actually be approaching a breakup point.

Hadasit Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hadasit Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hadasit Bio may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Israel Discount and Hadasit Bio

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

The idea behind Israel Discount Bank and Hadasit Bio 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.