Correlation Between Microsoft and Harel Index

Can any of the company-specific risk be diversified away by investing in both Microsoft and Harel Index 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 Microsoft and Harel Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Harel Index Funds, you can compare the effects of market volatilities on Microsoft and Harel Index 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 Microsoft with a short position of Harel Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Harel Index.

Diversification Opportunities for Microsoft and Harel Index

0.49

Correlation Coefficient

Microsoft  Harel Index

Very weak diversification

The 3 months correlation between Microsoft and Harel is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Harel Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harel Index Funds and Microsoft 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 Microsoft are associated (or correlated) with Harel Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harel Index Funds has no effect on the direction of Microsoft i.e., Microsoft and Harel Index go up and down completely randomly.

Pair Corralation between Microsoft and Harel Index

Given the investment horizon of 90 days Microsoft is expected to generate 1.12 times less return on investment than Harel Index. In addition to that, Microsoft is 7.31 times more volatile than Harel Index Funds. It trades about 0.05 of its total potential returns per unit of risk. Harel Index Funds is currently generating about 0.44 per unit of volatility. If you would invest  38,817  in Harel Index Funds on September 16, 2024 and sell it today you would earn a total of  1,379  from holding Harel Index Funds or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.31%
Values	Daily Returns

Microsoft  vs.  Harel Index Funds

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Harel Index Funds

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Index Funds are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Harel Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Harel Index

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

The idea behind Microsoft and Harel Index Funds 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.