Correlation Between Bank Leumi and NewMed Energy

Can any of the company-specific risk be diversified away by investing in both Bank Leumi and NewMed Energy 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 NewMed Energy 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 NewMed Energy , you can compare the effects of market volatilities on Bank Leumi and NewMed Energy 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 NewMed Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Leumi and NewMed Energy.

Diversification Opportunities for Bank Leumi and NewMed Energy

0.93

Correlation Coefficient

Bank Leumi  NewMed Energy

Almost no diversification

The 3 months correlation between Bank and NewMed is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and NewMed Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMed Energy 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 NewMed Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMed Energy has no effect on the direction of Bank Leumi i.e., Bank Leumi and NewMed Energy go up and down completely randomly.

Pair Corralation between Bank Leumi and NewMed Energy

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 0.85 times more return on investment than NewMed Energy. However, Bank Leumi Le Israel is 1.18 times less risky than NewMed Energy. It trades about 0.33 of its potential returns per unit of risk. NewMed Energy is currently generating about 0.25 per unit of risk. If you would invest  345,884  in Bank Leumi Le Israel on September 25, 2024 and sell it today you would earn a total of  81,816  from holding Bank Leumi Le Israel or generate 23.65% 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.  NewMed Energy

Bank Leumi Le

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 26 (%) 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.

NewMed Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NewMed Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NewMed Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Leumi and NewMed Energy

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

The idea behind Bank Leumi Le Israel and NewMed Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.