Correlation Between Israel China and Bank Leumi

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

By analyzing existing cross correlation between Israel China Biotechnology and Bank Leumi Le Israel, you can compare the effects of market volatilities on Israel China and Bank Leumi 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 Israel China with a short position of Bank Leumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel China and Bank Leumi.

Diversification Opportunities for Israel China and Bank Leumi

-0.41

Correlation Coefficient

Israel China  Bank Leumi

Very good diversification

The 3 months correlation between Israel and Bank is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Israel China Biotechnology and Bank Leumi Le Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Leumi Le and Israel China 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 Israel China Biotechnology are associated (or correlated) with Bank Leumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Leumi Le has no effect on the direction of Israel China i.e., Israel China and Bank Leumi go up and down completely randomly.

Pair Corralation between Israel China and Bank Leumi

Assuming the 90 days trading horizon Israel China Biotechnology is expected to under-perform the Bank Leumi. In addition to that, Israel China is 3.08 times more volatile than Bank Leumi Le Israel. It trades about -0.04 of its total potential returns per unit of risk. Bank Leumi Le Israel is currently generating about 0.22 per unit of volatility. If you would invest  360,527  in Bank Leumi Le Israel on September 29, 2024 and sell it today you would earn a total of  55,873  from holding Bank Leumi Le Israel or generate 15.5% return on investment over 90 days.

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

Israel China Biotechnology  vs.  Bank Leumi Le Israel

Israel China Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bank Leumi Le

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Leumi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Israel China and Bank Leumi

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

The idea behind Israel China Biotechnology and Bank Leumi Le Israel 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.