Correlation Between Bank Leumi and Paz Oil
Can any of the company-specific risk be diversified away by investing in both Bank Leumi and Paz Oil 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 Paz Oil 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 Paz Oil, you can compare the effects of market volatilities on Bank Leumi and Paz Oil 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 Paz Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Leumi and Paz Oil.
Diversification Opportunities for Bank Leumi and Paz Oil
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Paz is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Paz Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paz Oil 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 Paz Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paz Oil has no effect on the direction of Bank Leumi i.e., Bank Leumi and Paz Oil go up and down completely randomly.
Pair Corralation between Bank Leumi and Paz Oil
Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 0.83 times more return on investment than Paz Oil. However, Bank Leumi Le Israel is 1.2 times less risky than Paz Oil. It trades about 0.48 of its potential returns per unit of risk. Paz Oil is currently generating about 0.09 per unit of risk. If you would invest 374,477 in Bank Leumi Le Israel on August 31, 2024 and sell it today you would earn a total of 41,123 from holding Bank Leumi Le Israel or generate 10.98% 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. Paz Oil
Performance |
| Timeline |
| Bank Leumi Le |
| Paz Oil |
Bank Leumi and Paz Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Leumi and Paz Oil
The main advantage of trading using opposite Bank Leumi and Paz Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Leumi position performs unexpectedly, Paz Oil 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 Paz Oil will offset losses from the drop in Paz Oil'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 |
| Paz Oil vs. Fattal 1998 Holdings | Paz Oil vs. El Al Israel | Paz Oil vs. Bank Leumi Le Israel | Paz Oil vs. Teva Pharmaceutical Industries |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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