Correlation Between Clal Insurance and ICL Israel

Can any of the company-specific risk be diversified away by investing in both Clal Insurance 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 Clal Insurance and ICL Israel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clal Insurance Enterprises and ICL Israel Chemicals, you can compare the effects of market volatilities on Clal Insurance 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 Clal Insurance with a short position of ICL Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clal Insurance and ICL Israel.

Diversification Opportunities for Clal Insurance and ICL Israel

0.62

Correlation Coefficient

Clal Insurance  ICL Israel

Poor diversification

The 3 months correlation between Clal and ICL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Clal Insurance Enterprises 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 Clal Insurance 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 Clal Insurance Enterprises 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 Clal Insurance i.e., Clal Insurance and ICL Israel go up and down completely randomly.

Pair Corralation between Clal Insurance and ICL Israel

Assuming the 90 days trading horizon Clal Insurance Enterprises is expected to generate 0.84 times more return on investment than ICL Israel. However, Clal Insurance Enterprises is 1.2 times less risky than ICL Israel. It trades about 0.23 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about -0.06 per unit of risk. If you would invest  722,800  in Clal Insurance Enterprises on September 3, 2024 and sell it today you would earn a total of  48,400  from holding Clal Insurance Enterprises or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Clal Insurance Enterprises  vs.  ICL Israel Chemicals

Clal Insurance Enter

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

ICL Israel Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, ICL Israel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clal Insurance and ICL Israel

The main advantage of trading using opposite Clal Insurance and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clal Insurance 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.

The idea behind Clal Insurance Enterprises and ICL Israel Chemicals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.