Correlation Between Libental and Israel Discount

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

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

Diversification Opportunities for Libental and Israel Discount

0.14

Correlation Coefficient

Libental  Israel Discount

Average diversification

The @@bw1eo months correlation between Libental and Israel is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Libental and Israel Discount Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Discount Bank and Libental 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 Libental are associated (or correlated) with Israel Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Discount Bank has no effect on the direction of Libental i.e., Libental and Israel Discount go up and down completely randomly.

Pair Corralation between Libental and Israel Discount

Assuming the 90 days trading horizon Libental is expected to under-perform the Israel Discount. In addition to that, Libental is 1.44 times more volatile than Israel Discount Bank. It trades about -0.03 of its total potential returns per unit of risk. Israel Discount Bank is currently generating about 0.03 per unit of volatility. If you would invest  172,584  in Israel Discount Bank on February 3, 2024 and sell it today you would earn a total of  16,416  from holding Israel Discount Bank or generate 9.51% return on investment over 90 days.

Time Period	@@bw1EO Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Libental  vs.  Israel Discount Bank

Libental

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Libental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Israel Discount Bank

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Israel Discount is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Libental and Israel Discount

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

The idea behind Libental and Israel Discount Bank 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.