Correlation Between Bank Leumi and FIBI Holdings

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

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

Diversification Opportunities for Bank Leumi and FIBI Holdings

0.97

Correlation Coefficient

Bank Leumi  FIBI Holdings

Almost no diversification

The 3 months correlation between Bank and FIBI is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and FIBI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBI Holdings and Bank Leumi 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 Leumi Le Israel are associated (or correlated) with FIBI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBI Holdings has no effect on the direction of Bank Leumi i.e., Bank Leumi and FIBI Holdings go up and down completely randomly.

Pair Corralation between Bank Leumi and FIBI Holdings

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 1.33 times more return on investment than FIBI Holdings. However, Bank Leumi is 1.33 times more volatile than FIBI Holdings. It trades about 0.38 of its potential returns per unit of risk. FIBI Holdings is currently generating about 0.41 per unit of risk. If you would invest  331,142  in Bank Leumi Le Israel on September 13, 2024 and sell it today you would earn a total of  95,358  from holding Bank Leumi Le Israel or generate 28.8% return on investment over 90 days.

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

Bank Leumi Le Israel  vs.  FIBI Holdings

Bank Leumi Le

Risk-Adjusted Performance

29 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 29 (%) 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.

FIBI Holdings

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in FIBI Holdings are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, FIBI Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Leumi and FIBI Holdings

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

The idea behind Bank Leumi Le Israel and FIBI Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.