Correlation Between First International and Azrieli

Can any of the company-specific risk be diversified away by investing in both First International and Azrieli 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 First International and Azrieli into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First International Bank and Azrieli Group, you can compare the effects of market volatilities on First International and Azrieli 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 First International with a short position of Azrieli. Check out your portfolio center. Please also check ongoing floating volatility patterns of First International and Azrieli.

Diversification Opportunities for First International and Azrieli

0.72

Correlation Coefficient

First International  Azrieli

Poor diversification

The 3 months correlation between First and Azrieli is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First International Bank and Azrieli Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azrieli Group and First International 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 First International Bank are associated (or correlated) with Azrieli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azrieli Group has no effect on the direction of First International i.e., First International and Azrieli go up and down completely randomly.

Pair Corralation between First International and Azrieli

Assuming the 90 days trading horizon First International Bank is expected to under-perform the Azrieli. In addition to that, First International is 1.18 times more volatile than Azrieli Group. It trades about -0.21 of its total potential returns per unit of risk. Azrieli Group is currently generating about -0.14 per unit of volatility. If you would invest  2,504,287  in Azrieli Group on January 18, 2024 and sell it today you would lose (134,287) from holding Azrieli Group or give up 5.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

First International Bank  vs.  Azrieli Group

First International Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First International Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Azrieli Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azrieli Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Azrieli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First International and Azrieli

The main advantage of trading using opposite First International and Azrieli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First International position performs unexpectedly, Azrieli 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 Azrieli will offset losses from the drop in Azrieli's long position.

The idea behind First International Bank and Azrieli Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.