Correlation Between Elbit Systems and Bank Leumi

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

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

Diversification Opportunities for Elbit Systems and Bank Leumi

0.83

Correlation Coefficient

Elbit Systems  Bank Leumi

Very poor diversification

The 3 months correlation between Elbit and Bank is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems 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 Elbit Systems 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 Elbit Systems 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 Elbit Systems i.e., Elbit Systems and Bank Leumi go up and down completely randomly.

Pair Corralation between Elbit Systems and Bank Leumi

Assuming the 90 days trading horizon Elbit Systems is expected to generate 2.68 times more return on investment than Bank Leumi. However, Elbit Systems is 2.68 times more volatile than Bank Leumi Le Israel. It trades about 0.24 of its potential returns per unit of risk. Bank Leumi Le Israel is currently generating about 0.2 per unit of risk. If you would invest  7,178,472  in Elbit Systems on November 28, 2024 and sell it today you would earn a total of  3,491,528  from holding Elbit Systems or generate 48.64% return on investment over 90 days.

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

Elbit Systems  vs.  Bank Leumi Le Israel

Elbit Systems

Risk-Adjusted Performance

Solid

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

Bank Leumi Le

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 16 (%) 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 Elbit Systems and Bank Leumi

The main advantage of trading using opposite Elbit Systems and Bank Leumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elbit Systems 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 Elbit Systems 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.