Correlation Between Tower Semiconductor and Bank Leumi

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

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

Diversification Opportunities for Tower Semiconductor and Bank Leumi

0.63

Correlation Coefficient

Tower Semiconductor  Bank Leumi

Poor diversification

The 3 months correlation between Tower and Bank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor i.e., Tower Semiconductor and Bank Leumi go up and down completely randomly.

Pair Corralation between Tower Semiconductor and Bank Leumi

Assuming the 90 days trading horizon Tower Semiconductor is expected to generate 0.82 times more return on investment than Bank Leumi. However, Tower Semiconductor is 1.22 times less risky than Bank Leumi. It trades about -0.03 of its potential returns per unit of risk. Bank Leumi Le Israel is currently generating about -0.13 per unit of risk. If you would invest  1,207,000  in Tower Semiconductor on January 24, 2024 and sell it today you would lose (16,000) from holding Tower Semiconductor or give up 1.33% of portfolio value over 90 days.

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

Tower Semiconductor  vs.  Bank Leumi Le Israel

Tower Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tower Semiconductor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Bank Leumi Le

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank Leumi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tower Semiconductor and Bank Leumi

The main advantage of trading using opposite Tower Semiconductor and Bank Leumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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 Tower Semiconductor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.