Correlation Between Bank Leumi and Discount Investment
Can any of the company-specific risk be diversified away by investing in both Bank Leumi and Discount Investment 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 Bank Leumi and Discount Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Leumi Le Israel and Discount Investment Corp, you can compare the effects of market volatilities on Bank Leumi and Discount Investment 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 Bank Leumi with a short position of Discount Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Leumi and Discount Investment.
Diversification Opportunities for Bank Leumi and Discount Investment
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Discount is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Discount Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discount Investment Corp and Bank Leumi 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 Bank Leumi Le Israel are associated (or correlated) with Discount Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discount Investment Corp has no effect on the direction of Bank Leumi i.e., Bank Leumi and Discount Investment go up and down completely randomly.
Pair Corralation between Bank Leumi and Discount Investment
Assuming the 90 days trading horizon Bank Leumi is expected to generate 1.55 times less return on investment than Discount Investment. But when comparing it to its historical volatility, Bank Leumi Le Israel is 3.58 times less risky than Discount Investment. It trades about 0.73 of its potential returns per unit of risk. Discount Investment Corp is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 39,450 in Discount Investment Corp on August 27, 2024 and sell it today you would earn a total of 8,250 from holding Discount Investment Corp or generate 20.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Leumi Le Israel vs. Discount Investment Corp
Performance |
| Timeline |
| Bank Leumi Le |
| Discount Investment Corp |
Bank Leumi and Discount Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Leumi and Discount Investment
The main advantage of trading using opposite Bank Leumi and Discount Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Leumi position performs unexpectedly, Discount Investment 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 Discount Investment will offset losses from the drop in Discount Investment's long position.| Bank Leumi vs. Bank Hapoalim | Bank Leumi vs. Israel Discount Bank | Bank Leumi vs. Bezeq Israeli Telecommunication | Bank Leumi vs. Elbit Systems |
| Discount Investment vs. Arad | Discount Investment vs. Alony Hetz Properties | Discount Investment vs. Danel | Discount Investment vs. Airport City |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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