Correlation Between ICL Israel and Gilat Telecom

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

Diversification Opportunities for ICL Israel and Gilat Telecom

-0.17

Correlation Coefficient

ICL Israel  Gilat Telecom

Good diversification

The 3 months correlation between ICL and Gilat is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Gilat Telecom Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Telecom Global 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 Gilat Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Telecom Global has no effect on the direction of ICL Israel i.e., ICL Israel and Gilat Telecom go up and down completely randomly.

Pair Corralation between ICL Israel and Gilat Telecom

Assuming the 90 days trading horizon ICL Israel Chemicals is expected to generate 1.25 times more return on investment than Gilat Telecom. However, ICL Israel is 1.25 times more volatile than Gilat Telecom Global. It trades about 0.0 of its potential returns per unit of risk. Gilat Telecom Global is currently generating about -0.28 per unit of risk. If you would invest  209,000  in ICL Israel Chemicals on December 4, 2024 and sell it today you would lose (1,100) from holding ICL Israel Chemicals or give up 0.53% of portfolio value over 90 days.

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

ICL Israel Chemicals  vs.  Gilat Telecom Global

ICL Israel Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, ICL Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

Gilat Telecom Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gilat Telecom Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ICL Israel and Gilat Telecom

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

The idea behind ICL Israel Chemicals and Gilat Telecom Global 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.