Correlation Between Ravad and Migdal Insurance

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

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

Diversification Opportunities for Ravad and Migdal Insurance

-0.44

Correlation Coefficient

Ravad  Migdal Insurance

Very good diversification

The 3 months correlation between Ravad and Migdal is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ravad and Migdal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Migdal Insurance and Ravad 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 Ravad are associated (or correlated) with Migdal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Migdal Insurance has no effect on the direction of Ravad i.e., Ravad and Migdal Insurance go up and down completely randomly.

Pair Corralation between Ravad and Migdal Insurance

Assuming the 90 days trading horizon Ravad is expected to under-perform the Migdal Insurance. In addition to that, Ravad is 1.59 times more volatile than Migdal Insurance. It trades about -0.14 of its total potential returns per unit of risk. Migdal Insurance is currently generating about -0.17 per unit of volatility. If you would invest  50,900  in Migdal Insurance on February 2, 2024 and sell it today you would lose (3,200) from holding Migdal Insurance or give up 6.29% of portfolio value over 90 days.

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

Ravad  vs.  Migdal Insurance

Ravad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ravad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Migdal Insurance

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Migdal Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Migdal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ravad and Migdal Insurance

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

The idea behind Ravad and Migdal Insurance 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.