Correlation Between Peninsula and Bank Leumi

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

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

Diversification Opportunities for Peninsula and Bank Leumi

0.51

Correlation Coefficient

Peninsula  Bank Leumi

Very weak diversification

The 3 months correlation between Peninsula and Bank is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Peninsula Group 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 Peninsula 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 Peninsula Group 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 Peninsula i.e., Peninsula and Bank Leumi go up and down completely randomly.

Pair Corralation between Peninsula and Bank Leumi

Assuming the 90 days trading horizon Peninsula is expected to generate 2.73 times less return on investment than Bank Leumi. In addition to that, Peninsula is 1.4 times more volatile than Bank Leumi Le Israel. It trades about 0.08 of its total potential returns per unit of risk. Bank Leumi Le Israel is currently generating about 0.29 per unit of volatility. If you would invest  423,734  in Bank Leumi Le Israel on December 22, 2024 and sell it today you would earn a total of  92,566  from holding Bank Leumi Le Israel or generate 21.85% return on investment over 90 days.

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

Peninsula Group  vs.  Bank Leumi Le Israel

Peninsula Group

Risk-Adjusted Performance

Modest

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

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.

Pair Trading with Peninsula and Bank Leumi

The main advantage of trading using opposite Peninsula and Bank Leumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peninsula 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 Peninsula Group 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.