Correlation Between Reit 1 and Bank Leumi

Can any of the company-specific risk be diversified away by investing in both Reit 1 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 Reit 1 and Bank Leumi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reit 1 and Bank Leumi Le Israel, you can compare the effects of market volatilities on Reit 1 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 Reit 1 with a short position of Bank Leumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reit 1 and Bank Leumi.

Diversification Opportunities for Reit 1 and Bank Leumi

-0.23

Correlation Coefficient

Reit 1  Bank Leumi

Very good diversification

The 3 months correlation between Reit and Bank is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Reit 1 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 Reit 1 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 Reit 1 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 Reit 1 i.e., Reit 1 and Bank Leumi go up and down completely randomly.

Pair Corralation between Reit 1 and Bank Leumi

Assuming the 90 days trading horizon Reit 1 is expected to under-perform the Bank Leumi. In addition to that, Reit 1 is 1.18 times more volatile than Bank Leumi Le Israel. It trades about -0.06 of its total potential returns per unit of risk. Bank Leumi Le Israel is currently generating about 0.25 per unit of volatility. If you would invest  418,780  in Bank Leumi Le Israel on December 29, 2024 and sell it today you would earn a total of  85,820  from holding Bank Leumi Le Israel or generate 20.49% return on investment over 90 days.

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

Reit 1  vs.  Bank Leumi Le Israel

Reit 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reit 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 19 (%) 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 Reit 1 and Bank Leumi

The main advantage of trading using opposite Reit 1 and Bank Leumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reit 1 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 Reit 1 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.