Correlation Between Israel Discount and BEO Bancorp

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

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

Diversification Opportunities for Israel Discount and BEO Bancorp

-0.45

Correlation Coefficient

Israel Discount  BEO Bancorp

Very good diversification

The 3 months correlation between Israel and BEO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and BEO Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEO Bancorp and Israel Discount 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 Discount Bank are associated (or correlated) with BEO Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEO Bancorp has no effect on the direction of Israel Discount i.e., Israel Discount and BEO Bancorp go up and down completely randomly.

Pair Corralation between Israel Discount and BEO Bancorp

Assuming the 90 days horizon Israel Discount Bank is expected to generate 1.68 times more return on investment than BEO Bancorp. However, Israel Discount is 1.68 times more volatile than BEO Bancorp. It trades about 0.14 of its potential returns per unit of risk. BEO Bancorp is currently generating about -0.02 per unit of risk. If you would invest  5,200  in Israel Discount Bank on September 5, 2024 and sell it today you would earn a total of  619.00  from holding Israel Discount Bank or generate 11.9% return on investment over 90 days.

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

Israel Discount Bank  vs.  BEO Bancorp

Israel Discount Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Israel Discount may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BEO Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BEO Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BEO Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Israel Discount and BEO Bancorp

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

The idea behind Israel Discount Bank and BEO Bancorp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.