Correlation Between Harel Insurance and B Communications

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

Diversification Opportunities for Harel Insurance and B Communications

0.96

Correlation Coefficient

Harel Insurance  B Communications

Almost no diversification

The 3 months correlation between Harel and BCOM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications 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 B Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Communications has no effect on the direction of Harel Insurance i.e., Harel Insurance and B Communications go up and down completely randomly.

Pair Corralation between Harel Insurance and B Communications

Assuming the 90 days trading horizon Harel Insurance is expected to generate 1.18 times less return on investment than B Communications. But when comparing it to its historical volatility, Harel Insurance Investments is 1.47 times less risky than B Communications. It trades about 0.48 of its potential returns per unit of risk. B Communications is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  110,200  in B Communications on September 15, 2024 and sell it today you would earn a total of  66,900  from holding B Communications or generate 60.71% 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.  B Communications

Harel Insurance Inve

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Insurance Investments are ranked lower than 37 (%) 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.

B Communications

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harel Insurance and B Communications

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

The idea behind Harel Insurance Investments and B Communications 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.