Correlation Between Amada and Bank Hapoalim

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Can any of the company-specific risk be diversified away by investing in both Amada 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 Amada and Bank Hapoalim into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amada Co and Bank Hapoalim, you can compare the effects of market volatilities on Amada 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 Amada with a short position of Bank Hapoalim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amada and Bank Hapoalim.

Diversification Opportunities for Amada and Bank Hapoalim

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amada and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and Bank Hapoalim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Hapoalim and Amada 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 Amada Co 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 Amada i.e., Amada and Bank Hapoalim go up and down completely randomly.

Pair Corralation between Amada and Bank Hapoalim

Assuming the 90 days horizon Amada Co is expected to generate 1.14 times more return on investment than Bank Hapoalim. However, Amada is 1.14 times more volatile than Bank Hapoalim. It trades about 0.31 of its potential returns per unit of risk. Bank Hapoalim is currently generating about 0.16 per unit of risk. If you would invest  4,474  in Amada Co on December 29, 2023 and sell it today you would earn a total of  423.00  from holding Amada Co or generate 9.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy81.82%
ValuesDaily Returns

Amada Co  vs.  Bank Hapoalim

 Performance 
       Timeline  
Amada 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Amada showed solid returns over the last few months and may actually be approaching a breakup point.
Bank Hapoalim 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Hapoalim are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank Hapoalim is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amada and Bank Hapoalim Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amada and Bank Hapoalim

The main advantage of trading using opposite Amada and Bank Hapoalim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amada 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 Amada Co 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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