Correlation Between RSL Electronics and ICL Israel
Can any of the company-specific risk be diversified away by investing in both RSL Electronics and ICL Israel 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 RSL Electronics and ICL Israel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RSL Electronics and ICL Israel Chemicals, you can compare the effects of market volatilities on RSL Electronics and ICL Israel 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 RSL Electronics with a short position of ICL Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of RSL Electronics and ICL Israel.
Diversification Opportunities for RSL Electronics and ICL Israel
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RSL and ICL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding RSL Electronics and ICL Israel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICL Israel Chemicals and RSL Electronics 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 RSL Electronics are associated (or correlated) with ICL Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICL Israel Chemicals has no effect on the direction of RSL Electronics i.e., RSL Electronics and ICL Israel go up and down completely randomly.
Pair Corralation between RSL Electronics and ICL Israel
Assuming the 90 days trading horizon RSL Electronics is expected to generate 1.43 times more return on investment than ICL Israel. However, RSL Electronics is 1.43 times more volatile than ICL Israel Chemicals. It trades about 0.07 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about -0.02 per unit of risk. If you would invest 51,237 in RSL Electronics on September 12, 2024 and sell it today you would earn a total of 30,023 from holding RSL Electronics or generate 58.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
RSL Electronics vs. ICL Israel Chemicals
Performance |
Timeline |
RSL Electronics |
ICL Israel Chemicals |
RSL Electronics and ICL Israel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with RSL Electronics and ICL Israel
The main advantage of trading using opposite RSL Electronics and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RSL Electronics position performs unexpectedly, ICL Israel 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 ICL Israel will offset losses from the drop in ICL Israel's long position.RSL Electronics vs. Aran Research and | RSL Electronics vs. Al Bad Massuot Yitzhak | RSL Electronics vs. Analyst IMS Investment | RSL Electronics vs. Golan Plastic |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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