Correlation Between Isramco Negev and Electra

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

By analyzing existing cross correlation between Isramco Negev 2 and Electra, you can compare the effects of market volatilities on Isramco Negev and Electra 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 Isramco Negev with a short position of Electra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Isramco Negev and Electra.

Diversification Opportunities for Isramco Negev and Electra

0.73

Correlation Coefficient

Isramco Negev  Electra

Poor diversification

The 3 months correlation between Isramco and Electra is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Isramco Negev 2 and Electra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra and Isramco Negev 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 Isramco Negev 2 are associated (or correlated) with Electra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra has no effect on the direction of Isramco Negev i.e., Isramco Negev and Electra go up and down completely randomly.

Pair Corralation between Isramco Negev and Electra

Assuming the 90 days trading horizon Isramco Negev 2 is expected to under-perform the Electra. But the stock apears to be less risky and, when comparing its historical volatility, Isramco Negev 2 is 1.48 times less risky than Electra. The stock trades about -0.07 of its potential returns per unit of risk. The Electra is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  13,938,000  in Electra on February 19, 2024 and sell it today you would lose (618,000) from holding Electra or give up 4.43% of portfolio value over 90 days.

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

Isramco Negev 2  vs.  Electra

Isramco Negev 2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Isramco Negev 2 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.

Electra

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Isramco Negev and Electra

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

The idea behind Isramco Negev 2 and Electra 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 Global Correlations module to find global opportunities by holding instruments from different markets.