Correlation Between ICL Israel and Israel Discount
Can any of the company-specific risk be diversified away by investing in both ICL Israel and Israel Discount 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 Israel Discount 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 Israel Discount Bank, you can compare the effects of market volatilities on ICL Israel and Israel Discount 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 Israel Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and Israel Discount.
Diversification Opportunities for ICL Israel and Israel Discount
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ICL and Israel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Israel Discount Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Discount Bank 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 Israel Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Discount Bank has no effect on the direction of ICL Israel i.e., ICL Israel and Israel Discount go up and down completely randomly.
Pair Corralation between ICL Israel and Israel Discount
Assuming the 90 days trading horizon ICL Israel is expected to generate 5.35 times less return on investment than Israel Discount. In addition to that, ICL Israel is 1.27 times more volatile than Israel Discount Bank. It trades about 0.02 of its total potential returns per unit of risk. Israel Discount Bank is currently generating about 0.15 per unit of volatility. If you would invest 169,161 in Israel Discount Bank on August 29, 2024 and sell it today you would earn a total of 79,139 from holding Israel Discount Bank or generate 46.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICL Israel Chemicals vs. Israel Discount Bank
Performance |
| Timeline |
| ICL Israel Chemicals |
| Israel Discount Bank |
ICL Israel and Israel Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICL Israel and Israel Discount
The main advantage of trading using opposite ICL Israel and Israel Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, Israel Discount 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 Israel Discount will offset losses from the drop in Israel Discount's long position.| ICL Israel vs. Elbit Systems | ICL Israel vs. Bezeq Israeli Telecommunication | ICL Israel vs. Teva Pharmaceutical Industries | ICL Israel vs. Bank Leumi Le Israel |
| Israel Discount vs. Elbit Systems | Israel Discount vs. Discount Investment Corp | Israel Discount vs. Clal Insurance Enterprises | Israel Discount vs. AudioCodes |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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