Correlation Between Bank Leumi and Israel Shipyards
Can any of the company-specific risk be diversified away by investing in both Bank Leumi and Israel Shipyards 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 Israel Shipyards 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 Israel Shipyards, you can compare the effects of market volatilities on Bank Leumi and Israel Shipyards 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 Israel Shipyards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Leumi and Israel Shipyards.
Diversification Opportunities for Bank Leumi and Israel Shipyards
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Israel is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Israel Shipyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Shipyards 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 Israel Shipyards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Shipyards has no effect on the direction of Bank Leumi i.e., Bank Leumi and Israel Shipyards go up and down completely randomly.
Pair Corralation between Bank Leumi and Israel Shipyards
Assuming the 90 days trading horizon Bank Leumi is expected to generate 4.24 times less return on investment than Israel Shipyards. But when comparing it to its historical volatility, Bank Leumi Le Israel is 3.04 times less risky than Israel Shipyards. It trades about 0.28 of its potential returns per unit of risk. Israel Shipyards is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 744,500 in Israel Shipyards on September 15, 2024 and sell it today you would earn a total of 241,900 from holding Israel Shipyards or generate 32.49% 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. Israel Shipyards
Performance |
| Timeline |
| Bank Leumi Le |
| Israel Shipyards |
Bank Leumi and Israel Shipyards Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Leumi and Israel Shipyards
The main advantage of trading using opposite Bank Leumi and Israel Shipyards positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Leumi position performs unexpectedly, Israel Shipyards 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 Israel Shipyards will offset losses from the drop in Israel Shipyards' long position.| Bank Leumi vs. Bank Hapoalim | Bank Leumi vs. Israel Discount Bank | Bank Leumi vs. Mizrahi Tefahot | Bank Leumi vs. Bezeq Israeli Telecommunication |
| Israel Shipyards vs. ICL Israel Chemicals | Israel Shipyards vs. Libra Insurance | Israel Shipyards vs. Bank Leumi Le Israel | Israel Shipyards vs. Payment Financial Technologies |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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