Correlation Between ICL Israel and Michman Basad

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

Diversification Opportunities for ICL Israel and Michman Basad

0.73

Correlation Coefficient

ICL Israel  Michman Basad

Poor diversification

The 3 months correlation between ICL and Michman is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Michman Basad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Michman Basad 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 Michman Basad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Michman Basad has no effect on the direction of ICL Israel i.e., ICL Israel and Michman Basad go up and down completely randomly.

Pair Corralation between ICL Israel and Michman Basad

Assuming the 90 days trading horizon ICL Israel Chemicals is expected to generate 1.87 times more return on investment than Michman Basad. However, ICL Israel is 1.87 times more volatile than Michman Basad. It trades about 0.2 of its potential returns per unit of risk. Michman Basad is currently generating about 0.03 per unit of risk. If you would invest  172,363  in ICL Israel Chemicals on December 29, 2024 and sell it today you would earn a total of  41,537  from holding ICL Israel Chemicals or generate 24.1% 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.  Michman Basad

ICL Israel Chemicals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 15 (%) 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.

Michman Basad

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Michman Basad are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Michman Basad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICL Israel and Michman Basad

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

The idea behind ICL Israel Chemicals and Michman Basad 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.