Correlation Between Harel Insurance and Dan Hotels

Can any of the company-specific risk be diversified away by investing in both Harel Insurance and Dan Hotels 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 Harel Insurance and Dan Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Harel Insurance Investments and Dan Hotels, you can compare the effects of market volatilities on Harel Insurance and Dan Hotels 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 Harel Insurance with a short position of Dan Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harel Insurance and Dan Hotels.

Diversification Opportunities for Harel Insurance and Dan Hotels

0.53

Correlation Coefficient

Harel Insurance  Dan Hotels

Very weak diversification

The 3 months correlation between Harel and Dan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and Dan Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dan Hotels and Harel Insurance 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 Harel Insurance Investments are associated (or correlated) with Dan Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dan Hotels has no effect on the direction of Harel Insurance i.e., Harel Insurance and Dan Hotels go up and down completely randomly.

Pair Corralation between Harel Insurance and Dan Hotels

Assuming the 90 days trading horizon Harel Insurance Investments is expected to generate 0.79 times more return on investment than Dan Hotels. However, Harel Insurance Investments is 1.26 times less risky than Dan Hotels. It trades about 0.37 of its potential returns per unit of risk. Dan Hotels is currently generating about 0.08 per unit of risk. If you would invest  421,540  in Harel Insurance Investments on November 29, 2024 and sell it today you would earn a total of  175,760  from holding Harel Insurance Investments or generate 41.69% return on investment over 90 days.

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

Harel Insurance Investments  vs.  Dan Hotels

Harel Insurance Inve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Insurance Investments are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harel Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Dan Hotels

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dan Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dan Hotels may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Harel Insurance and Dan Hotels

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

The idea behind Harel Insurance Investments and Dan Hotels 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.