Correlation Between Shufersal and Bank Leumi

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

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

Diversification Opportunities for Shufersal and Bank Leumi

0.87

Correlation Coefficient

Shufersal  Bank Leumi

Very poor diversification

The 3 months correlation between Shufersal and Bank is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shufersal and Bank Leumi Le Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Leumi Le and Shufersal 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 Shufersal are associated (or correlated) with Bank Leumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Leumi Le has no effect on the direction of Shufersal i.e., Shufersal and Bank Leumi go up and down completely randomly.

Pair Corralation between Shufersal and Bank Leumi

Assuming the 90 days trading horizon Shufersal is expected to generate 1.5 times less return on investment than Bank Leumi. But when comparing it to its historical volatility, Shufersal is 1.03 times less risky than Bank Leumi. It trades about 0.25 of its potential returns per unit of risk. Bank Leumi Le Israel is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  341,036  in Bank Leumi Le Israel on September 12, 2024 and sell it today you would earn a total of  93,764  from holding Bank Leumi Le Israel or generate 27.49% return on investment over 90 days.

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

Shufersal  vs.  Bank Leumi Le Israel

Shufersal

Risk-Adjusted Performance

19 of 100

Solid

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

Bank Leumi Le

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 28 (%) 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.

Pair Trading with Shufersal and Bank Leumi

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

The idea behind Shufersal and Bank Leumi Le Israel 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 Global Correlations module to find global opportunities by holding instruments from different markets.