Correlation Between Tel Aviv and Harel Sal

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

By analyzing existing cross correlation between Tel Aviv 35 and Harel Sal SP, you can compare the effects of market volatilities on Tel Aviv and Harel Sal 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 Tel Aviv with a short position of Harel Sal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tel Aviv and Harel Sal.

Diversification Opportunities for Tel Aviv and Harel Sal

0.91

Correlation Coefficient

Tel Aviv  Harel Sal

Almost no diversification

The 3 months correlation between Tel and Harel is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tel Aviv 35 and Harel Sal SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harel Sal SP and Tel Aviv 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 Tel Aviv 35 are associated (or correlated) with Harel Sal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harel Sal SP has no effect on the direction of Tel Aviv i.e., Tel Aviv and Harel Sal go up and down completely randomly.

Pair Corralation between Tel Aviv and Harel Sal

Assuming the 90 days trading horizon Tel Aviv 35 is expected to generate 1.3 times more return on investment than Harel Sal. However, Tel Aviv is 1.3 times more volatile than Harel Sal SP. It trades about 0.35 of its potential returns per unit of risk. Harel Sal SP is currently generating about 0.22 per unit of risk. If you would invest  201,921  in Tel Aviv 35 on September 16, 2024 and sell it today you would earn a total of  31,625  from holding Tel Aviv 35 or generate 15.66% return on investment over 90 days.

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

Tel Aviv 35  vs.  Harel Sal SP

Pair Trading with Tel Aviv and Harel Sal

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

The idea behind Tel Aviv 35 and Harel Sal SP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..