Correlation Between Bank Leumi and Bezeq Israeli

Can any of the company-specific risk be diversified away by investing in both Bank Leumi and Bezeq Israeli 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 Bezeq Israeli 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 Bezeq Israeli Telecommunication, you can compare the effects of market volatilities on Bank Leumi and Bezeq Israeli 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 Bezeq Israeli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Leumi and Bezeq Israeli.

Diversification Opportunities for Bank Leumi and Bezeq Israeli

-0.31

Correlation Coefficient

Bank Leumi  Bezeq Israeli

Very good diversification

The 3 months correlation between Bank and Bezeq is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Bezeq Israeli Telecommunicatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bezeq Israeli Teleco 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 Bezeq Israeli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bezeq Israeli Teleco has no effect on the direction of Bank Leumi i.e., Bank Leumi and Bezeq Israeli go up and down completely randomly.

Pair Corralation between Bank Leumi and Bezeq Israeli

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to under-perform the Bezeq Israeli. But the stock apears to be less risky and, when comparing its historical volatility, Bank Leumi Le Israel is 1.04 times less risky than Bezeq Israeli. The stock trades about -0.28 of its potential returns per unit of risk. The Bezeq Israeli Telecommunication is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  46,245  in Bezeq Israeli Telecommunication on February 5, 2024 and sell it today you would lose (185.00) from holding Bezeq Israeli Telecommunication or give up 0.4% of portfolio value over 90 days.

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

Bank Leumi Le Israel  vs.  Bezeq Israeli Telecommunicatio

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.

Bezeq Israeli Teleco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bezeq Israeli Telecommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bezeq Israeli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Leumi and Bezeq Israeli

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

The idea behind Bank Leumi Le Israel and Bezeq Israeli Telecommunication 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.