Correlation Between Bank Leumi and Ormat Technologies

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

Diversification Opportunities for Bank Leumi and Ormat Technologies

0.71

Correlation Coefficient

Bank Leumi  Ormat Technologies

Poor diversification

The 3 months correlation between Bank and Ormat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies 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 Ormat Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ormat Technologies has no effect on the direction of Bank Leumi i.e., Bank Leumi and Ormat Technologies go up and down completely randomly.

Pair Corralation between Bank Leumi and Ormat Technologies

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 1.0 times more return on investment than Ormat Technologies. However, Bank Leumi Le Israel is 1.0 times less risky than Ormat Technologies. It trades about 0.56 of its potential returns per unit of risk. Ormat Technologies is currently generating about -0.03 per unit of risk. If you would invest  367,848  in Bank Leumi Le Israel on August 30, 2024 and sell it today you would earn a total of  47,752  from holding Bank Leumi Le Israel or generate 12.98% return on investment over 90 days.

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

Bank Leumi Le Israel  vs.  Ormat Technologies

Bank Leumi Le

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 21 (%) 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.

Ormat Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ormat Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Leumi and Ormat Technologies

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

The idea behind Bank Leumi Le Israel and Ormat Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.