Correlation Between ICL Israel and Golan Plastic

Can any of the company-specific risk be diversified away by investing in both ICL Israel and Golan Plastic 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 Golan Plastic 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 Golan Plastic, you can compare the effects of market volatilities on ICL Israel and Golan Plastic 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 Golan Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and Golan Plastic.

Diversification Opportunities for ICL Israel and Golan Plastic

0.6

Correlation Coefficient

ICL Israel  Golan Plastic

Poor diversification

The 3 months correlation between ICL and Golan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Golan Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golan Plastic 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 Golan Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golan Plastic has no effect on the direction of ICL Israel i.e., ICL Israel and Golan Plastic go up and down completely randomly.

Pair Corralation between ICL Israel and Golan Plastic

Assuming the 90 days trading horizon ICL Israel is expected to generate 54.05 times less return on investment than Golan Plastic. But when comparing it to its historical volatility, ICL Israel Chemicals is 1.02 times less risky than Golan Plastic. It trades about 0.0 of its potential returns per unit of risk. Golan Plastic is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  92,300  in Golan Plastic on September 2, 2024 and sell it today you would earn a total of  25,700  from holding Golan Plastic or generate 27.84% 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.  Golan Plastic

ICL Israel Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICL Israel Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Golan Plastic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Golan Plastic are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Golan Plastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICL Israel and Golan Plastic

The main advantage of trading using opposite ICL Israel and Golan Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, Golan Plastic 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 Golan Plastic will offset losses from the drop in Golan Plastic's long position.

The idea behind ICL Israel Chemicals and Golan Plastic 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.