Correlation Between Bank Leumi and Sarfati

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

Diversification Opportunities for Bank Leumi and Sarfati

0.97
  Correlation Coefficient

Almost no diversification

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

Pair Corralation between Bank Leumi and Sarfati

Assuming the 90 days trading horizon Bank Leumi is expected to generate 14.22 times less return on investment than Sarfati. But when comparing it to its historical volatility, Bank Leumi Le Israel is 1.46 times less risky than Sarfati. It trades about 0.01 of its potential returns per unit of risk. Sarfati is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  402,000  in Sarfati on September 28, 2024 and sell it today you would earn a total of  17,300  from holding Sarfati or generate 4.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Bank Leumi Le Israel  vs.  Sarfati

 Performance 
       Timeline  
Bank Leumi Le 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
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.
Sarfati 

Risk-Adjusted Performance

19 of 100

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

Bank Leumi and Sarfati Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank Leumi and Sarfati

The main advantage of trading using opposite Bank Leumi and Sarfati positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Leumi position performs unexpectedly, Sarfati 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 Sarfati will offset losses from the drop in Sarfati's long position.
The idea behind Bank Leumi Le Israel and Sarfati 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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