Correlation Between Dan Hotels and Bezeq Israeli

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

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

Diversification Opportunities for Dan Hotels and Bezeq Israeli

-0.31

Correlation Coefficient

Dan Hotels  Bezeq Israeli

Very good diversification

The 3 months correlation between Dan and Bezeq is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dan Hotels and Bezeq Israeli Telecommunicatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bezeq Israeli Teleco and Dan Hotels 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 Dan Hotels are associated (or correlated) with Bezeq Israeli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bezeq Israeli Teleco has no effect on the direction of Dan Hotels i.e., Dan Hotels and Bezeq Israeli go up and down completely randomly.

Pair Corralation between Dan Hotels and Bezeq Israeli

Assuming the 90 days trading horizon Dan Hotels is expected to under-perform the Bezeq Israeli. But the stock apears to be less risky and, when comparing its historical volatility, Dan Hotels is 2.85 times less risky than Bezeq Israeli. The stock trades about -0.36 of its potential returns per unit of risk. The Bezeq Israeli Telecommunication is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  45,468  in Bezeq Israeli Telecommunication on February 2, 2024 and sell it today you would lose (588.00) from holding Bezeq Israeli Telecommunication or give up 1.29% of portfolio value over 90 days.

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

Dan Hotels  vs.  Bezeq Israeli Telecommunicatio

Dan Hotels

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Dan Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Dan Hotels may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Bezeq Israeli Teleco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bezeq Israeli Telecommunication 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.

Pair Trading with Dan Hotels and Bezeq Israeli

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

The idea behind Dan Hotels and Bezeq Israeli Telecommunication 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.