Correlation Between Bank Leumi and Sella Real

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

Diversification Opportunities for Bank Leumi and Sella Real

0.7

Correlation Coefficient

Bank Leumi  Sella Real

Poor diversification

The 3 months correlation between Bank and Sella is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Sella Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sella Real Estate 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 Sella Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sella Real Estate has no effect on the direction of Bank Leumi i.e., Bank Leumi and Sella Real go up and down completely randomly.

Pair Corralation between Bank Leumi and Sella Real

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to generate 0.85 times more return on investment than Sella Real. However, Bank Leumi Le Israel is 1.18 times less risky than Sella Real. It trades about 0.2 of its potential returns per unit of risk. Sella Real Estate is currently generating about 0.01 per unit of risk. If you would invest  413,000  in Bank Leumi Le Israel on November 28, 2024 and sell it today you would earn a total of  57,000  from holding Bank Leumi Le Israel or generate 13.8% 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.  Sella Real Estate

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.

Sella Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sella Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sella Real is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank Leumi and Sella Real

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

The idea behind Bank Leumi Le Israel and Sella Real Estate 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.