Correlation Between Bazan Oil and Israel Corp

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

Diversification Opportunities for Bazan Oil and Israel Corp

0.05
  Correlation Coefficient

Significant diversification

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

Pair Corralation between Bazan Oil and Israel Corp

Assuming the 90 days trading horizon Bazan Oil Refineries is expected to generate 1.01 times more return on investment than Israel Corp. However, Bazan Oil is 1.01 times more volatile than Israel Corp. It trades about 0.02 of its potential returns per unit of risk. Israel Corp is currently generating about -0.05 per unit of risk. 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

Bazan Oil Refineries  vs.  Israel Corp

 Performance 
       Timeline  
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 

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 and Israel Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bazan Oil and Israel Corp

The main advantage of trading using opposite Bazan Oil and Israel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bazan Oil position performs unexpectedly, Israel Corp 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 Israel Corp will offset losses from the drop in Israel Corp's long position.
The idea behind Bazan Oil Refineries and Israel Corp 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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