Correlation Between Bank Hapoalim and Mizrahi Tefahot

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

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

Diversification Opportunities for Bank Hapoalim and Mizrahi Tefahot

0.85

Correlation Coefficient

Bank Hapoalim  Mizrahi Tefahot

Very poor diversification

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

Pair Corralation between Bank Hapoalim and Mizrahi Tefahot

Assuming the 90 days trading horizon Bank Hapoalim is expected to generate 1.08 times more return on investment than Mizrahi Tefahot. However, Bank Hapoalim is 1.08 times more volatile than Mizrahi Tefahot. It trades about 0.22 of its potential returns per unit of risk. Mizrahi Tefahot is currently generating about 0.12 per unit of risk. If you would invest  426,648  in Bank Hapoalim on December 30, 2024 and sell it today you would earn a total of  75,352  from holding Bank Hapoalim or generate 17.66% return on investment over 90 days.

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

Bank Hapoalim  vs.  Mizrahi Tefahot

Bank Hapoalim

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Hapoalim are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Hapoalim sustained solid returns over the last few months and may actually be approaching a breakup point.

Mizrahi Tefahot

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mizrahi Tefahot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mizrahi Tefahot may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank Hapoalim and Mizrahi Tefahot

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

The idea behind Bank Hapoalim and Mizrahi Tefahot 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.