Correlation Between Harel Insurance and Gilat Telecom

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

Diversification Opportunities for Harel Insurance and Gilat Telecom

-0.15

Correlation Coefficient

Harel Insurance  Gilat Telecom

Good diversification

The 3 months correlation between Harel and Gilat is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and Gilat Telecom Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Telecom Global 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 Gilat Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Telecom Global has no effect on the direction of Harel Insurance i.e., Harel Insurance and Gilat Telecom go up and down completely randomly.

Pair Corralation between Harel Insurance and Gilat Telecom

Assuming the 90 days trading horizon Harel Insurance Investments is expected to generate 0.86 times more return on investment than Gilat Telecom. However, Harel Insurance Investments is 1.17 times less risky than Gilat Telecom. It trades about 0.23 of its potential returns per unit of risk. Gilat Telecom Global is currently generating about -0.06 per unit of risk. If you would invest  502,920  in Harel Insurance Investments on December 20, 2024 and sell it today you would earn a total of  129,980  from holding Harel Insurance Investments or generate 25.85% return on investment over 90 days.

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

Harel Insurance Investments  vs.  Gilat Telecom Global

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 18 (%) 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.

Gilat Telecom Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gilat Telecom Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Harel Insurance and Gilat Telecom

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

The idea behind Harel Insurance Investments and Gilat Telecom Global 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.