Can any of the company-specific risk be diversified away by investing in both Clal Insurance and Ashot Ashkelon 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 Clal Insurance and Ashot Ashkelon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clal Insurance Enterprises and Ashot Ashkelon Industries, you can compare the effects of market volatilities on Clal Insurance and Ashot Ashkelon 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 Clal Insurance with a short position of Ashot Ashkelon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Insurance and Ashot Ashkelon.
Diversification Opportunities for Clal Insurance and Ashot Ashkelon
The 3 months correlation between Clal and Ashot is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Clal Insurance Enterprises and Ashot Ashkelon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashot Ashkelon Industries and Clal Insurance 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 Clal Insurance Enterprises are associated (or correlated) with Ashot Ashkelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashot Ashkelon Industries has no effect on the direction of Clal Insurance i.e., Clal Insurance and Ashot Ashkelon go up and down completely randomly.
Pair Corralation between Clal Insurance and Ashot Ashkelon
Assuming the 90 days trading horizon Clal Insurance Enterprises is expected to under-perform the Ashot Ashkelon. But the stock apears to be less risky and, when comparing its historical volatility, Clal Insurance Enterprises is 1.55 times less risky than Ashot Ashkelon. The stock trades about -0.08 of its potential returns per unit of risk. The Ashot Ashkelon Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 310,288 in Ashot Ashkelon Industries on March 6, 2024 and sell it today you would earn a total of 25,712 from holding Ashot Ashkelon Industries or generate 8.29% return on investment over 90 days.
Over the last 90 days Clal Insurance Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Ashot Ashkelon Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ashot Ashkelon sustained solid returns over the last few months and may actually be approaching a breakup point.