Correlation Between Bank Leumi and Partner
Can any of the company-specific risk be diversified away by investing in both Bank Leumi and Partner 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 Partner 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 Partner, you can compare the effects of market volatilities on Bank Leumi and Partner 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 Partner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Leumi and Partner.
Diversification Opportunities for Bank Leumi and Partner
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Partner is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Partner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partner 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 Partner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partner has no effect on the direction of Bank Leumi i.e., Bank Leumi and Partner go up and down completely randomly.
Pair Corralation between Bank Leumi and Partner
Assuming the 90 days trading horizon Bank Leumi is expected to generate 2.0 times less return on investment than Partner. But when comparing it to its historical volatility, Bank Leumi Le Israel is 3.65 times less risky than Partner. It trades about 0.78 of its potential returns per unit of risk. Partner is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 156,000 in Partner on August 28, 2024 and sell it today you would earn a total of 50,000 from holding Partner or generate 32.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Leumi Le Israel vs. Partner
Performance |
| Timeline |
| Bank Leumi Le |
| Partner |
Bank Leumi and Partner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Leumi and Partner
The main advantage of trading using opposite Bank Leumi and Partner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Leumi position performs unexpectedly, Partner 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 Partner will offset losses from the drop in Partner's long position.| Bank Leumi vs. Bank Hapoalim | Bank Leumi vs. Israel Discount Bank | Bank Leumi vs. Mizrahi Tefahot | Bank Leumi vs. Bezeq Israeli Telecommunication |
| Partner vs. Cellcom Israel | Partner vs. Bezeq Israeli Telecommunication | Partner vs. Bank Hapoalim | Partner vs. Elbit Systems |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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