Correlation Between ICL Israel and Aerodrome
Can any of the company-specific risk be diversified away by investing in both ICL Israel and Aerodrome 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 ICL Israel and Aerodrome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICL Israel Chemicals and Aerodrome Group, you can compare the effects of market volatilities on ICL Israel and Aerodrome 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 ICL Israel with a short position of Aerodrome. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and Aerodrome.
Diversification Opportunities for ICL Israel and Aerodrome
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ICL and Aerodrome is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and ICL Israel 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 ICL Israel Chemicals are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of ICL Israel i.e., ICL Israel and Aerodrome go up and down completely randomly.
Pair Corralation between ICL Israel and Aerodrome
Assuming the 90 days trading horizon ICL Israel Chemicals is expected to generate 0.37 times more return on investment than Aerodrome. However, ICL Israel Chemicals is 2.67 times less risky than Aerodrome. It trades about -0.02 of its potential returns per unit of risk. Aerodrome Group is currently generating about -0.34 per unit of risk. If you would invest 167,800 in ICL Israel Chemicals on September 4, 2024 and sell it today you would lose (1,600) from holding ICL Israel Chemicals or give up 0.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICL Israel Chemicals vs. Aerodrome Group
Performance |
| Timeline |
| ICL Israel Chemicals |
| Aerodrome Group |
ICL Israel and Aerodrome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICL Israel and Aerodrome
The main advantage of trading using opposite ICL Israel and Aerodrome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, Aerodrome 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 Aerodrome will offset losses from the drop in Aerodrome's long position.| ICL Israel vs. Elbit Systems | ICL Israel vs. Bezeq Israeli Telecommunication | ICL Israel vs. Bank Hapoalim | ICL Israel vs. Teva Pharmaceutical Industries |
| Aerodrome vs. One Software Technologies | Aerodrome vs. Suny Cellular Communication | Aerodrome vs. Multi Retail Group | Aerodrome vs. B Communications |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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