Correlation Between Paz Oil and Dor Alon
Can any of the company-specific risk be diversified away by investing in both Paz Oil and Dor Alon 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 Paz Oil and Dor Alon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paz Oil and Dor Alon, you can compare the effects of market volatilities on Paz Oil and Dor Alon 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 Paz Oil with a short position of Dor Alon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paz Oil and Dor Alon.
Diversification Opportunities for Paz Oil and Dor Alon
Poor diversification
The 3 months correlation between Paz and Dor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Paz Oil and Dor Alon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dor Alon and Paz 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 Paz Oil are associated (or correlated) with Dor Alon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dor Alon has no effect on the direction of Paz Oil i.e., Paz Oil and Dor Alon go up and down completely randomly.
Pair Corralation between Paz Oil and Dor Alon
Assuming the 90 days trading horizon Paz Oil is expected to generate 1.16 times more return on investment than Dor Alon. However, Paz Oil is 1.16 times more volatile than Dor Alon. It trades about -0.01 of its potential returns per unit of risk. Dor Alon is currently generating about -0.04 per unit of risk. If you would invest 4,657,518 in Paz Oil on January 25, 2024 and sell it today you would lose (1,039,518) from holding Paz Oil or give up 22.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paz Oil vs. Dor Alon
Performance |
| Timeline |
| Paz Oil |
| Dor Alon |
Paz Oil and Dor Alon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paz Oil and Dor Alon
The main advantage of trading using opposite Paz Oil and Dor Alon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paz Oil position performs unexpectedly, Dor Alon 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 Dor Alon will offset losses from the drop in Dor Alon's long position.| Paz Oil vs. Fattal 1998 Holdings | Paz Oil vs. El Al Israel | Paz Oil vs. Bank Leumi Le Israel | Paz Oil vs. Teva Pharmaceutical Industries |
| Dor Alon vs. Clal Insurance Enterprises | Dor Alon vs. Israel Discount Bank | Dor Alon vs. Bezeq Israeli Telecommunication | Dor Alon vs. Alony Hetz Properties |
Check out your portfolio center.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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