Correlation Between International Flavors and IsraelLtd

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

By analyzing existing cross correlation between International Flavors Fragrances and Israel, you can compare the effects of market volatilities on International Flavors and IsraelLtd 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 International Flavors with a short position of IsraelLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Flavors and IsraelLtd.

Diversification Opportunities for International Flavors and IsraelLtd

-0.26

Correlation Coefficient

International Flavors  IsraelLtd

Very good diversification

The 3 months correlation between International and IsraelLtd is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IsraelLtd and International Flavors 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 International Flavors Fragrances are associated (or correlated) with IsraelLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IsraelLtd has no effect on the direction of International Flavors i.e., International Flavors and IsraelLtd go up and down completely randomly.

Pair Corralation between International Flavors and IsraelLtd

Considering the 90-day investment horizon International Flavors Fragrances is expected to under-perform the IsraelLtd. But the stock apears to be less risky and, when comparing its historical volatility, International Flavors Fragrances is 9.57 times less risky than IsraelLtd. The stock trades about -0.1 of its potential returns per unit of risk. The Israel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  24,700  in Israel on December 30, 2024 and sell it today you would earn a total of  3,800  from holding Israel or generate 15.38% return on investment over 90 days.

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

International Flavors Fragranc  vs.  Israel

International Flavors

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

IsraelLtd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Israel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, IsraelLtd reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Flavors and IsraelLtd

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

The idea behind International Flavors Fragrances and Israel 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.