Correlation Between ICL Israel and Israel Corp
Can any of the company-specific risk be diversified away by investing in both ICL Israel and Israel Corp 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 Corp 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 Corp, you can compare the effects of market volatilities on ICL Israel and Israel Corp 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 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and Israel Corp.
Diversification Opportunities for ICL Israel and Israel Corp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ICL and Israel is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Israel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Corp 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 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Corp has no effect on the direction of ICL Israel i.e., ICL Israel and Israel Corp go up and down completely randomly.
Pair Corralation between ICL Israel and Israel Corp
Assuming the 90 days trading horizon ICL Israel Chemicals is expected to generate 0.9 times more return on investment than Israel Corp. However, ICL Israel Chemicals is 1.11 times less risky than Israel Corp. It trades about 0.25 of its potential returns per unit of risk. Israel Corp is currently generating about 0.18 per unit of risk. If you would invest 152,700 in ICL Israel Chemicals on August 28, 2024 and sell it today you would earn a total of 18,600 from holding ICL Israel Chemicals or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICL Israel Chemicals vs. Israel Corp
Performance |
| Timeline |
| ICL Israel Chemicals |
| Israel Corp |
ICL Israel and Israel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICL Israel and Israel Corp
The main advantage of trading using opposite ICL Israel and Israel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, Israel Corp 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 Corp will offset losses from the drop in Israel Corp'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 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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