Correlation Between Terminal X and Bank Leumi

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

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

Diversification Opportunities for Terminal X and Bank Leumi

0.97

Correlation Coefficient

Terminal X  Bank Leumi

Almost no diversification

The 3 months correlation between Terminal and Bank is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Terminal X Online 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 Terminal X 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 Terminal X Online 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 Terminal X i.e., Terminal X and Bank Leumi go up and down completely randomly.

Pair Corralation between Terminal X and Bank Leumi

Assuming the 90 days trading horizon Terminal X Online is expected to generate 1.22 times more return on investment than Bank Leumi. However, Terminal X is 1.22 times more volatile than Bank Leumi Le Israel. It trades about 0.57 of its potential returns per unit of risk. Bank Leumi Le Israel is currently generating about 0.38 per unit of risk. If you would invest  31,360  in Terminal X Online on September 15, 2024 and sell it today you would earn a total of  18,550  from holding Terminal X Online or generate 59.15% return on investment over 90 days.

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

Terminal X Online  vs.  Bank Leumi Le Israel

Terminal X Online

Risk-Adjusted Performance

44 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Terminal X Online are ranked lower than 44 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Terminal X sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank Leumi Le

Risk-Adjusted Performance

29 of 100

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.

Pair Trading with Terminal X and Bank Leumi

The main advantage of trading using opposite Terminal X and Bank Leumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terminal X 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 Terminal X Online 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.