Correlation Between Tel Aviv and Victory Supermarket

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

By analyzing existing cross correlation between Tel Aviv 35 and Victory Supermarket Chain, you can compare the effects of market volatilities on Tel Aviv and Victory Supermarket 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 Tel Aviv with a short position of Victory Supermarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Victory Supermarket.

Diversification Opportunities for Tel Aviv and Victory Supermarket

0.83

Correlation Coefficient

Tel Aviv  Victory Supermarket

Very poor diversification

The 3 months correlation between Tel and Victory is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Victory Supermarket Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Supermarket Chain and Tel Aviv 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 Tel Aviv 35 are associated (or correlated) with Victory Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Supermarket Chain has no effect on the direction of Tel Aviv i.e., Tel Aviv and Victory Supermarket go up and down completely randomly.

Pair Corralation between Tel Aviv and Victory Supermarket

Assuming the 90 days trading horizon Tel Aviv 35 is expected to under-perform the Victory Supermarket. But the index apears to be less risky and, when comparing its historical volatility, Tel Aviv 35 is 1.67 times less risky than Victory Supermarket. The index trades about -0.07 of its potential returns per unit of risk. The Victory Supermarket Chain is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  473,447  in Victory Supermarket Chain on February 2, 2024 and sell it today you would earn a total of  16,553  from holding Victory Supermarket Chain or generate 3.5% return on investment over 90 days.

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

Tel Aviv 35  vs.  Victory Supermarket Chain

Pair Trading with Tel Aviv and Victory Supermarket

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

The idea behind Tel Aviv 35 and Victory Supermarket Chain 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.