Correlation Between Harel Insurance and First International

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

Diversification Opportunities for Harel Insurance and First International

0.94

Correlation Coefficient

Harel Insurance  First International

Almost no diversification

The 3 months correlation between Harel and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Harel Insurance Investments and First International Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First International Bank 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 First International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First International Bank has no effect on the direction of Harel Insurance i.e., Harel Insurance and First International go up and down completely randomly.

Pair Corralation between Harel Insurance and First International

Assuming the 90 days trading horizon Harel Insurance Investments is expected to generate 1.57 times more return on investment than First International. However, Harel Insurance is 1.57 times more volatile than First International Bank. It trades about 0.46 of its potential returns per unit of risk. First International Bank is currently generating about 0.35 per unit of risk. If you would invest  335,700  in Harel Insurance Investments on September 24, 2024 and sell it today you would earn a total of  168,300  from holding Harel Insurance Investments or generate 50.13% 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.  First International Bank

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.

First International Bank

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First International Bank are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harel Insurance and First International

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

The idea behind Harel Insurance Investments and First International Bank 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 Transaction History module to view history of all your transactions and understand their impact on performance.