Correlation Between Harel Insurance and Israel China

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

Diversification Opportunities for Harel Insurance and Israel China

-0.45

Correlation Coefficient

Harel Insurance  Israel China

Very good diversification

The 3 months correlation between Harel and Israel is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and Israel China Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel China Biotech 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 Israel China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel China Biotech has no effect on the direction of Harel Insurance i.e., Harel Insurance and Israel China go up and down completely randomly.

Pair Corralation between Harel Insurance and Israel China

Assuming the 90 days trading horizon Harel Insurance Investments is expected to generate 0.45 times more return on investment than Israel China. However, Harel Insurance Investments is 2.22 times less risky than Israel China. It trades about 0.33 of its potential returns per unit of risk. Israel China Biotechnology is currently generating about -0.08 per unit of risk. If you would invest  337,612  in Harel Insurance Investments on September 3, 2024 and sell it today you would earn a total of  100,388  from holding Harel Insurance Investments or generate 29.73% return on investment over 90 days.

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

Harel Insurance Investments  vs.  Israel China Biotechnology

Harel Insurance Inve

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Insurance Investments are ranked lower than 25 (%) 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.

Israel China Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Harel Insurance and Israel China

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

The idea behind Harel Insurance Investments and Israel China Biotechnology 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.