Correlation Between BOC Hong and Bank Hapoalim

Can any of the company-specific risk be diversified away by investing in both BOC Hong and Bank Hapoalim 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 BOC Hong and Bank Hapoalim into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BOC Hong Kong and Bank Hapoalim ADR, you can compare the effects of market volatilities on BOC Hong and Bank Hapoalim 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 BOC Hong with a short position of Bank Hapoalim. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOC Hong and Bank Hapoalim.

Diversification Opportunities for BOC Hong and Bank Hapoalim

-0.04

Correlation Coefficient

BOC Hong  Bank Hapoalim

Good diversification

The 3 months correlation between BOC and Bank is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding BOC Hong Kong and Bank Hapoalim ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Hapoalim ADR and BOC Hong 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 BOC Hong Kong are associated (or correlated) with Bank Hapoalim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Hapoalim ADR has no effect on the direction of BOC Hong i.e., BOC Hong and Bank Hapoalim go up and down completely randomly.

Pair Corralation between BOC Hong and Bank Hapoalim

Assuming the 90 days horizon BOC Hong Kong is expected to under-perform the Bank Hapoalim. But the pink sheet apears to be less risky and, when comparing its historical volatility, BOC Hong Kong is 1.63 times less risky than Bank Hapoalim. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Bank Hapoalim ADR is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  5,010  in Bank Hapoalim ADR on September 4, 2024 and sell it today you would earn a total of  1,130  from holding Bank Hapoalim ADR or generate 22.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BOC Hong Kong  vs.  Bank Hapoalim ADR

BOC Hong Kong

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BOC Hong Kong are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, BOC Hong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank Hapoalim ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Hapoalim ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bank Hapoalim showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BOC Hong and Bank Hapoalim

The main advantage of trading using opposite BOC Hong and Bank Hapoalim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOC Hong position performs unexpectedly, Bank Hapoalim 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 Bank Hapoalim will offset losses from the drop in Bank Hapoalim's long position.

The idea behind BOC Hong Kong and Bank Hapoalim ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.