Can any of the company-specific risk be diversified away by investing in both Israel Canada and Shufersal 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 Canada and Shufersal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Israel Canada and Shufersal, you can compare the effects of market volatilities on Israel Canada and Shufersal 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 Canada with a short position of Shufersal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Canada and Shufersal.
Diversification Opportunities for Israel Canada and Shufersal
The 3 months correlation between Israel and Shufersal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Israel Canada and Shufersal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shufersal and Israel Canada 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 Canada are associated (or correlated) with Shufersal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shufersal has no effect on the direction of Israel Canada i.e., Israel Canada and Shufersal go up and down completely randomly.
Pair Corralation between Israel Canada and Shufersal
Assuming the 90 days trading horizon Israel Canada is expected to under-perform the Shufersal. In addition to that, Israel Canada is 1.67 times more volatile than Shufersal. It trades about -0.09 of its total potential returns per unit of risk. Shufersal is currently generating about 0.01 per unit of volatility. If you would invest 245,331 in Shufersal on March 5, 2024 and sell it today you would lose (331.00) from holding Shufersal or give up 0.13% of portfolio value over 90 days.
Over the last 90 days Israel Canada 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 July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Over the last 90 days Shufersal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Shufersal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.