Correlation Between Bank Leumi and Jerusalem

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

Diversification Opportunities for Bank Leumi and Jerusalem

0.85

Correlation Coefficient

Bank Leumi  Jerusalem

Very poor diversification

The 3 months correlation between Bank and Jerusalem is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Jerusalem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jerusalem 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 Jerusalem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jerusalem has no effect on the direction of Bank Leumi i.e., Bank Leumi and Jerusalem go up and down completely randomly.

Pair Corralation between Bank Leumi and Jerusalem

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 0.65 times more return on investment than Jerusalem. However, Bank Leumi Le Israel is 1.53 times less risky than Jerusalem. It trades about 0.18 of its potential returns per unit of risk. Jerusalem is currently generating about 0.07 per unit of risk. If you would invest  425,300  in Bank Leumi Le Israel on November 29, 2024 and sell it today you would earn a total of  49,700  from holding Bank Leumi Le Israel or generate 11.69% return on investment over 90 days.

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

Bank Leumi Le Israel  vs.  Jerusalem

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 14 (%) 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.

Jerusalem

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jerusalem are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jerusalem may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Bank Leumi and Jerusalem

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

The idea behind Bank Leumi Le Israel and Jerusalem 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.