Correlation Between Harel Insurance and Inrom Construction

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

Diversification Opportunities for Harel Insurance and Inrom Construction

0.97

Correlation Coefficient

Harel Insurance  Inrom Construction

Almost no diversification

The 3 months correlation between Harel and Inrom is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and Inrom Construction Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inrom Construction 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 Inrom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inrom Construction has no effect on the direction of Harel Insurance i.e., Harel Insurance and Inrom Construction go up and down completely randomly.

Pair Corralation between Harel Insurance and Inrom Construction

Assuming the 90 days trading horizon Harel Insurance Investments is expected to generate 0.96 times more return on investment than Inrom Construction. However, Harel Insurance Investments is 1.04 times less risky than Inrom Construction. It trades about 0.17 of its potential returns per unit of risk. Inrom Construction Industries is currently generating about 0.14 per unit of risk. If you would invest  319,500  in Harel Insurance Investments on October 12, 2024 and sell it today you would earn a total of  196,000  from holding Harel Insurance Investments or generate 61.35% return on investment over 90 days.

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

Harel Insurance Investments  vs.  Inrom Construction Industries

Harel Insurance Inve

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Insurance Investments are ranked lower than 36 (%) 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.

Inrom Construction

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inrom Construction Industries are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inrom Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harel Insurance and Inrom Construction

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

The idea behind Harel Insurance Investments and Inrom Construction Industries 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.