Correlation Between Paz Oil and Bank Hapoalim

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

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

Diversification Opportunities for Paz Oil and Bank Hapoalim

-0.3

Correlation Coefficient

Paz Oil  Bank Hapoalim

Very good diversification

The 3 months correlation between Paz and Bank is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Paz Oil and Bank Hapoalim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Hapoalim and Paz Oil 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 Paz Oil are associated (or correlated) with Bank Hapoalim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Hapoalim has no effect on the direction of Paz Oil i.e., Paz Oil and Bank Hapoalim go up and down completely randomly.

Pair Corralation between Paz Oil and Bank Hapoalim

Assuming the 90 days trading horizon Paz Oil is expected to generate 1.31 times more return on investment than Bank Hapoalim. However, Paz Oil is 1.31 times more volatile than Bank Hapoalim. It trades about 0.27 of its potential returns per unit of risk. Bank Hapoalim is currently generating about 0.32 per unit of risk. If you would invest  4,177,000  in Paz Oil on October 26, 2024 and sell it today you would earn a total of  1,048,000  from holding Paz Oil or generate 25.09% return on investment over 90 days.

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

Paz Oil  vs.  Bank Hapoalim

Paz Oil

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paz Oil are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Paz Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank Hapoalim

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Hapoalim are ranked lower than 25 (%) 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.

Pair Trading with Paz Oil and Bank Hapoalim

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

The idea behind Paz Oil and Bank Hapoalim 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 Directory module to find actively traded commodities issued by global exchanges.