Correlation Between Harel Insurance and Aerodrome

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

Diversification Opportunities for Harel Insurance and Aerodrome

0.52

Correlation Coefficient

Harel Insurance  Aerodrome

Very weak diversification

The 3 months correlation between Harel and Aerodrome is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group 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 Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of Harel Insurance i.e., Harel Insurance and Aerodrome go up and down completely randomly.

Pair Corralation between Harel Insurance and Aerodrome

Assuming the 90 days trading horizon Harel Insurance Investments is expected to generate 0.26 times more return on investment than Aerodrome. However, Harel Insurance Investments is 3.89 times less risky than Aerodrome. It trades about 0.15 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.04 per unit of risk. If you would invest  266,538  in Harel Insurance Investments on September 27, 2024 and sell it today you would earn a total of  238,462  from holding Harel Insurance Investments or generate 89.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.52%
Values	Daily Returns

Harel Insurance Investments  vs.  Aerodrome Group

Harel Insurance Inve

Risk-Adjusted Performance

30 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Insurance Investments are ranked lower than 30 (%) 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.

Aerodrome Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harel Insurance and Aerodrome

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

The idea behind Harel Insurance Investments and Aerodrome Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.