Correlation Between Ituran Location and Silicom

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

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

Diversification Opportunities for Ituran Location and Silicom

-0.04

Correlation Coefficient

Ituran Location  Silicom

Good diversification

The 3 months correlation between Ituran and Silicom is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ituran Location and and Silicom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicom and Ituran Location 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 Ituran Location and are associated (or correlated) with Silicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicom has no effect on the direction of Ituran Location i.e., Ituran Location and Silicom go up and down completely randomly.

Pair Corralation between Ituran Location and Silicom

Given the investment horizon of 90 days Ituran Location and is expected to generate 0.57 times more return on investment than Silicom. However, Ituran Location and is 1.77 times less risky than Silicom. It trades about 0.04 of its potential returns per unit of risk. Silicom is currently generating about -0.07 per unit of risk. If you would invest  2,151  in Ituran Location and on August 24, 2024 and sell it today you would earn a total of  699.00  from holding Ituran Location and or generate 32.5% return on investment over 90 days.

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

Ituran Location and  vs.  Silicom

Ituran Location

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ituran Location and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ituran Location is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Silicom

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silicom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Silicom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ituran Location and Silicom

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

The idea behind Ituran Location and and Silicom 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.