Correlation Between Dow Jones and ICL Israel
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ICL Israel 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 Dow Jones and ICL Israel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and ICL Israel Chemicals, you can compare the effects of market volatilities on Dow Jones and ICL Israel 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 Dow Jones with a short position of ICL Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ICL Israel.
Diversification Opportunities for Dow Jones and ICL Israel
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and ICL is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ICL Israel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICL Israel Chemicals and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with ICL Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICL Israel Chemicals has no effect on the direction of Dow Jones i.e., Dow Jones and ICL Israel go up and down completely randomly.
Pair Corralation between Dow Jones and ICL Israel
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.56 times less return on investment than ICL Israel. But when comparing it to its historical volatility, Dow Jones Industrial is 3.0 times less risky than ICL Israel. It trades about 0.15 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 152,700 in ICL Israel Chemicals on August 24, 2024 and sell it today you would earn a total of 16,200 from holding ICL Israel Chemicals or generate 10.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 72.73% |
| Values | Daily Returns |
Dow Jones Industrial vs. ICL Israel Chemicals
Performance |
| Timeline |
Dow Jones and ICL Israel Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ICL Israel Chemicals
Pair trading matchups for ICL Israel
Pair Trading with Dow Jones and ICL Israel
The main advantage of trading using opposite Dow Jones and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ICL Israel 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 ICL Israel will offset losses from the drop in ICL Israel's long position.| Dow Jones vs. Barrick Gold Corp | Dow Jones vs. Jutal Offshore Oil | Dow Jones vs. Eastern Co | Dow Jones vs. Weyco Group |
| ICL Israel vs. Elbit Systems | ICL Israel vs. Bezeq Israeli Telecommunication | ICL Israel vs. Bank Hapoalim | ICL Israel vs. Teva Pharmaceutical Industries |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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