Correlation Between ICL Israel and CF Industries
Can any of the company-specific risk be diversified away by investing in both ICL Israel and CF Industries 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 CF Industries 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 CF Industries Holdings, you can compare the effects of market volatilities on ICL Israel and CF Industries 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 CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and CF Industries.
Diversification Opportunities for ICL Israel and CF Industries
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ICL and CF Industries is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of ICL Israel i.e., ICL Israel and CF Industries go up and down completely randomly.
Pair Corralation between ICL Israel and CF Industries
Considering the 90-day investment horizon ICL Israel is expected to generate 2.47 times less return on investment than CF Industries. In addition to that, ICL Israel is 1.15 times more volatile than CF Industries Holdings. It trades about 0.01 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.04 per unit of volatility. If you would invest 7,219 in CF Industries Holdings on November 1, 2024 and sell it today you would earn a total of 2,001 from holding CF Industries Holdings or generate 27.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICL Israel Chemicals vs. CF Industries Holdings
Performance |
| Timeline |
| ICL Israel Chemicals |
| CF Industries Holdings |
ICL Israel and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICL Israel and CF Industries
The main advantage of trading using opposite ICL Israel and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, CF Industries 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 CF Industries will offset losses from the drop in CF Industries' long position.| ICL Israel vs. CF Industries Holdings | ICL Israel vs. The Mosaic | ICL Israel vs. American Vanguard | ICL Israel vs. CVR Partners LP |
| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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