Correlation Between Clal Insurance and Hilan

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

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

Diversification Opportunities for Clal Insurance and Hilan

0.43

Correlation Coefficient

Clal Insurance  Hilan

Very weak diversification

The 3 months correlation between Clal and Hilan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Clal Insurance Enterprises and Hilan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilan and Clal 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 Clal Insurance Enterprises are associated (or correlated) with Hilan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilan has no effect on the direction of Clal Insurance i.e., Clal Insurance and Hilan go up and down completely randomly.

Pair Corralation between Clal Insurance and Hilan

Assuming the 90 days trading horizon Clal Insurance Enterprises is expected to generate 1.24 times more return on investment than Hilan. However, Clal Insurance is 1.24 times more volatile than Hilan. It trades about -0.07 of its potential returns per unit of risk. Hilan is currently generating about -0.28 per unit of risk. If you would invest  646,300  in Clal Insurance Enterprises on February 1, 2024 and sell it today you would lose (15,800) from holding Clal Insurance Enterprises or give up 2.44% of portfolio value over 90 days.

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

Clal Insurance Enterprises  vs.  Hilan

Clal Insurance Enter

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Hilan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hilan may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Clal Insurance and Hilan

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

The idea behind Clal Insurance Enterprises and Hilan 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.