Correlation Between Israel Discount and Bank Hapoalim

Can any of the company-specific risk be diversified away by investing in both Israel Discount 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 Israel Discount and Bank Hapoalim 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 Bank Hapoalim ADR, you can compare the effects of market volatilities on Israel Discount 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 Israel Discount with a short position of Bank Hapoalim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and Bank Hapoalim.

Diversification Opportunities for Israel Discount and Bank Hapoalim

0.32

Correlation Coefficient

Israel Discount  Bank Hapoalim

Weak diversification

The 3 months correlation between Israel and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank 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 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 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 Israel Discount i.e., Israel Discount and Bank Hapoalim go up and down completely randomly.

Pair Corralation between Israel Discount and Bank Hapoalim

Assuming the 90 days horizon Israel Discount is expected to generate 1.46 times less return on investment than Bank Hapoalim. But when comparing it to its historical volatility, Israel Discount Bank is 1.31 times less risky than Bank Hapoalim. It trades about 0.14 of its potential returns per unit of risk. Bank Hapoalim ADR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,975  in Bank Hapoalim ADR on September 3, 2024 and sell it today you would earn a total of  875.00  from holding Bank Hapoalim ADR or generate 17.59% return on investment over 90 days.

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

Israel Discount Bank  vs.  Bank Hapoalim ADR

Israel Discount Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Israel Discount may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank Hapoalim ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Hapoalim ADR are ranked lower than 12 (%) 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 Israel Discount and Bank Hapoalim

The main advantage of trading using opposite Israel Discount and Bank Hapoalim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Discount 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 Israel Discount Bank 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.