Correlation Between Tel Aviv and Nice
Can any of the company-specific risk be diversified away by investing in both Tel Aviv and Nice 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 Tel Aviv and Nice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tel Aviv Stock and Nice, you can compare the effects of market volatilities on Tel Aviv and Nice 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 Tel Aviv with a short position of Nice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Nice.
Diversification Opportunities for Tel Aviv and Nice
Very poor diversification
The 3 months correlation between Tel and Nice is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv Stock and Nice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nice and Tel Aviv 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 Tel Aviv Stock are associated (or correlated) with Nice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nice has no effect on the direction of Tel Aviv i.e., Tel Aviv and Nice go up and down completely randomly.
Pair Corralation between Tel Aviv and Nice
Assuming the 90 days trading horizon Tel Aviv Stock is expected to generate 1.46 times more return on investment than Nice. However, Tel Aviv is 1.46 times more volatile than Nice. It trades about 0.23 of its potential returns per unit of risk. Nice is currently generating about -0.39 per unit of risk. If you would invest 232,000 in Tel Aviv Stock on January 24, 2024 and sell it today you would earn a total of 20,000 from holding Tel Aviv Stock or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tel Aviv Stock vs. Nice
Performance |
| Timeline |
| Tel Aviv Stock |
| Nice |
Tel Aviv and Nice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tel Aviv and Nice
The main advantage of trading using opposite Tel Aviv and Nice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tel Aviv position performs unexpectedly, Nice 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 Nice will offset losses from the drop in Nice's long position.| Tel Aviv vs. Bank Leumi Le Israel | Tel Aviv vs. Elbit Systems | Tel Aviv vs. El Al Israel | Tel Aviv vs. Bank Hapoalim |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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