Correlation Between First Resource and Israel Discount

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

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

Diversification Opportunities for First Resource and Israel Discount

0.84

Correlation Coefficient

First Resource  Israel Discount

Very poor diversification

The 3 months correlation between First and Israel is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Resource Bank 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 First Resource 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 First Resource Bank 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 First Resource i.e., First Resource and Israel Discount go up and down completely randomly.

Pair Corralation between First Resource and Israel Discount

Given the investment horizon of 90 days First Resource is expected to generate 1.69 times less return on investment than Israel Discount. But when comparing it to its historical volatility, First Resource Bank is 2.43 times less risky than Israel Discount. It trades about 0.24 of its potential returns per unit of risk. Israel Discount Bank is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,476  in Israel Discount Bank on April 25, 2025 and sell it today you would earn a total of  2,734  from holding Israel Discount Bank or generate 36.57% return on investment over 90 days.

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

First Resource Bank  vs.  Israel Discount Bank

First Resource Bank

Risk-Adjusted Performance

Solid

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

Israel Discount Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Discount Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Israel Discount showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Resource and Israel Discount

The main advantage of trading using opposite First Resource and Israel Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Resource 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 First Resource Bank 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.