Correlation Between Bank Leumi and Oil Refineries

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

Diversification Opportunities for Bank Leumi and Oil Refineries

0.68

Correlation Coefficient

Bank Leumi  Oil Refineries

Poor diversification

The 3 months correlation between Bank and Oil is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Refineries 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 Oil Refineries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Refineries has no effect on the direction of Bank Leumi i.e., Bank Leumi and Oil Refineries go up and down completely randomly.

Pair Corralation between Bank Leumi and Oil Refineries

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 0.65 times more return on investment than Oil Refineries. However, Bank Leumi Le Israel is 1.55 times less risky than Oil Refineries. It trades about 0.28 of its potential returns per unit of risk. Oil Refineries is currently generating about 0.08 per unit of risk. If you would invest  421,059  in Bank Leumi Le Israel on December 19, 2024 and sell it today you would earn a total of  88,741  from holding Bank Leumi Le Israel or generate 21.08% 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.  Oil Refineries

Bank Leumi Le

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 22 (%) 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.

Oil Refineries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Refineries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Oil Refineries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank Leumi and Oil Refineries

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

The idea behind Bank Leumi Le Israel and Oil Refineries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.