Correlation Between ICL Israel and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both ICL Israel and Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor, you can compare the effects of market volatilities on ICL Israel and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and Tower Semiconductor.
Diversification Opportunities for ICL Israel and Tower Semiconductor
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between ICL and Tower is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of ICL Israel i.e., ICL Israel and Tower Semiconductor go up and down completely randomly.
Pair Corralation between ICL Israel and Tower Semiconductor
Assuming the 90 days trading horizon ICL Israel Chemicals is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, ICL Israel Chemicals is 1.06 times less risky than Tower Semiconductor. The stock trades about -0.04 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,435,000 in Tower Semiconductor on August 27, 2024 and sell it today you would earn a total of 312,000 from holding Tower Semiconductor or generate 21.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICL Israel Chemicals vs. Tower Semiconductor
Performance |
| Timeline |
| ICL Israel Chemicals |
| Tower Semiconductor |
ICL Israel and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICL Israel and Tower Semiconductor
The main advantage of trading using opposite ICL Israel and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor'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 |
| Tower Semiconductor vs. Teva Pharmaceutical Industries | Tower Semiconductor vs. Elbit Systems | Tower Semiconductor vs. Nice | Tower Semiconductor vs. Bezeq Israeli Telecommunication |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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