Correlation Between Bank Hapoalim and Palram
Can any of the company-specific risk be diversified away by investing in both Bank Hapoalim and Palram 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 Hapoalim and Palram into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Hapoalim and Palram, you can compare the effects of market volatilities on Bank Hapoalim and Palram 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 Hapoalim with a short position of Palram. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Hapoalim and Palram.
Diversification Opportunities for Bank Hapoalim and Palram
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Palram is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank Hapoalim and Palram in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palram and Bank Hapoalim 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 Hapoalim are associated (or correlated) with Palram. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palram has no effect on the direction of Bank Hapoalim i.e., Bank Hapoalim and Palram go up and down completely randomly.
Pair Corralation between Bank Hapoalim and Palram
Assuming the 90 days trading horizon Bank Hapoalim is expected to generate 5.33 times less return on investment than Palram. But when comparing it to its historical volatility, Bank Hapoalim is 1.3 times less risky than Palram. It trades about 0.14 of its potential returns per unit of risk. Palram is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest 687,400 in Palram on September 13, 2024 and sell it today you would earn a total of 152,900 from holding Palram or generate 22.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Hapoalim vs. Palram
Performance |
| Timeline |
| Bank Hapoalim |
| Palram |
Bank Hapoalim and Palram Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Hapoalim and Palram
The main advantage of trading using opposite Bank Hapoalim and Palram positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Hapoalim position performs unexpectedly, Palram 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 Palram will offset losses from the drop in Palram's long position.| Bank Hapoalim vs. Bank Leumi Le Israel | Bank Hapoalim vs. Israel Discount Bank | Bank Hapoalim vs. Mizrahi Tefahot | Bank Hapoalim vs. Bezeq Israeli Telecommunication |
| Palram vs. Elbit Systems | Palram vs. Bezeq Israeli Telecommunication | Palram vs. Bank Hapoalim | Palram 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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