Correlation Between Bank Leumi and Aerodrome

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

Diversification Opportunities for Bank Leumi and Aerodrome

0.22

Correlation Coefficient

Bank Leumi  Aerodrome

Modest diversification

The 3 months correlation between Bank and Aerodrome is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le Israel and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group 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 Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of Bank Leumi i.e., Bank Leumi and Aerodrome go up and down completely randomly.

Pair Corralation between Bank Leumi and Aerodrome

Assuming the 90 days trading horizon Bank Leumi Le Israel is expected to under-perform the Aerodrome. But the stock apears to be less risky and, when comparing its historical volatility, Bank Leumi Le Israel is 3.29 times less risky than Aerodrome. The stock trades about -0.28 of its potential returns per unit of risk. The Aerodrome Group is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  8,030  in Aerodrome Group on February 5, 2024 and sell it today you would earn a total of  2,770  from holding Aerodrome Group or generate 34.5% return on investment over 90 days.

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

Bank Leumi Le Israel  vs.  Aerodrome Group

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.

Aerodrome Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Leumi and Aerodrome

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

The idea behind Bank Leumi Le Israel and Aerodrome Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.