Correlation Between Bank Leumi and Hadasit Bio

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

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

Diversification Opportunities for Bank Leumi and Hadasit Bio

-0.48

Correlation Coefficient

Bank Leumi  Hadasit Bio

Very good diversification

The 3 months correlation between Bank and Hadasit is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Hadasit Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hadasit Bio and Bank Leumi 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 Leumi Le Israel are associated (or correlated) with Hadasit Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hadasit Bio has no effect on the direction of Bank Leumi i.e., Bank Leumi and Hadasit Bio go up and down completely randomly.

Pair Corralation between Bank Leumi and Hadasit Bio

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to under-perform the Hadasit Bio. But the stock apears to be less risky and, when comparing its historical volatility, Bank Leumi Le Israel is 3.49 times less risky than Hadasit Bio. The stock trades about -0.1 of its potential returns per unit of risk. The Hadasit Bio is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,400  in Hadasit Bio on February 2, 2024 and sell it today you would lose (90.00) from holding Hadasit Bio or give up 1.67% of portfolio value over 90 days.

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

Bank Leumi Le Israel  vs.  Hadasit Bio

Bank Leumi Le

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Leumi Le Israel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Leumi may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Hadasit Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hadasit Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hadasit Bio may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bank Leumi and Hadasit Bio

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

The idea behind Bank Leumi Le Israel and Hadasit Bio 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.