Correlation Between Bank Leumi and Edri El

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

Diversification Opportunities for Bank Leumi and Edri El

-0.61

Correlation Coefficient

Bank Leumi  Edri El

Excellent diversification

The 3 months correlation between Bank and Edri is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Edri El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edri El 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 Edri El. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edri El has no effect on the direction of Bank Leumi i.e., Bank Leumi and Edri El go up and down completely randomly.

Pair Corralation between Bank Leumi and Edri El

Assuming the 90 days trading horizon Bank Leumi is expected to generate 1.21 times less return on investment than Edri El. But when comparing it to its historical volatility, Bank Leumi Le Israel is 3.77 times less risky than Edri El. It trades about 0.2 of its potential returns per unit of risk. Edri El is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,790  in Edri El on February 16, 2024 and sell it today you would earn a total of  80.00  from holding Edri El or generate 2.87% return on investment over 90 days.

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

Bank Leumi Le Israel  vs.  Edri El

Bank Leumi Le

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Leumi may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Edri El

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edri El has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank Leumi and Edri El

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

The idea behind Bank Leumi Le Israel and Edri El 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.