Correlation Between Airport City and Mizrahi Tefahot

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

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

Diversification Opportunities for Airport City and Mizrahi Tefahot

0.74

Correlation Coefficient

Airport City  Mizrahi Tefahot

Poor diversification

The 3 months correlation between Airport and Mizrahi is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Airport City and Mizrahi Tefahot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mizrahi Tefahot and Airport City 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 Airport City are associated (or correlated) with Mizrahi Tefahot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mizrahi Tefahot has no effect on the direction of Airport City i.e., Airport City and Mizrahi Tefahot go up and down completely randomly.

Pair Corralation between Airport City and Mizrahi Tefahot

Assuming the 90 days trading horizon Airport City is expected to under-perform the Mizrahi Tefahot. In addition to that, Airport City is 1.05 times more volatile than Mizrahi Tefahot. It trades about -0.08 of its total potential returns per unit of risk. Mizrahi Tefahot is currently generating about -0.07 per unit of volatility. If you would invest  1,379,000  in Mizrahi Tefahot on January 28, 2024 and sell it today you would lose (45,000) from holding Mizrahi Tefahot or give up 3.26% of portfolio value over 90 days.

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

Airport City  vs.  Mizrahi Tefahot

Airport City

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airport City has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mizrahi Tefahot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mizrahi Tefahot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mizrahi Tefahot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Airport City and Mizrahi Tefahot

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

The idea behind Airport City and Mizrahi Tefahot 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .