Correlation Between Israel Corp and Bazan Oil

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Can any of the company-specific risk be diversified away by investing in both Israel Corp and Bazan Oil 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 Corp and Bazan Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Israel Corp and Bazan Oil Refineries, you can compare the effects of market volatilities on Israel Corp and Bazan Oil 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 Corp with a short position of Bazan Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Corp and Bazan Oil.

Diversification Opportunities for Israel Corp and Bazan Oil

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Israel and Bazan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Israel Corp and Bazan Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bazan Oil Refineries and Israel Corp 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 Corp are associated (or correlated) with Bazan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bazan Oil Refineries has no effect on the direction of Israel Corp i.e., Israel Corp and Bazan Oil go up and down completely randomly.

Pair Corralation between Israel Corp and Bazan Oil

Assuming the 90 days trading horizon Israel Corp is expected to under-perform the Bazan Oil. But the stock apears to be less risky and, when comparing its historical volatility, Israel Corp is 1.01 times less risky than Bazan Oil. The stock trades about -0.05 of its potential returns per unit of risk. The Bazan Oil Refineries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,164  in Bazan Oil Refineries on December 30, 2023 and sell it today you would earn a total of  1,036  from holding Bazan Oil Refineries or generate 9.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Israel Corp  vs.  Bazan Oil Refineries

 Performance 
       Timeline  
Israel Corp 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Israel Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Corp may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Bazan Oil Refineries 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bazan Oil Refineries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bazan Oil may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Israel Corp and Bazan Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Israel Corp and Bazan Oil

The main advantage of trading using opposite Israel Corp and Bazan Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Corp position performs unexpectedly, Bazan Oil 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 Bazan Oil will offset losses from the drop in Bazan Oil's long position.
The idea behind Israel Corp and Bazan Oil Refineries 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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