Correlation Between Lavoro Limited and ICL Israel

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

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

Diversification Opportunities for Lavoro Limited and ICL Israel

0.58

Correlation Coefficient

Lavoro Limited  ICL Israel

Very weak diversification

The 3 months correlation between Lavoro and ICL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Class 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 Lavoro Limited 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 Lavoro Limited Class 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 Lavoro Limited i.e., Lavoro Limited and ICL Israel go up and down completely randomly.

Pair Corralation between Lavoro Limited and ICL Israel

Given the investment horizon of 90 days Lavoro Limited Class is expected to generate 1.96 times more return on investment than ICL Israel. However, Lavoro Limited is 1.96 times more volatile than ICL Israel Chemicals. It trades about -0.01 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about -0.03 per unit of risk. If you would invest  997.00  in Lavoro Limited Class on September 1, 2024 and sell it today you would lose (491.00) from holding Lavoro Limited Class or give up 49.25% of portfolio value over 90 days.

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

Lavoro Limited Class  vs.  ICL Israel Chemicals

Lavoro Limited Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lavoro Limited Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Lavoro Limited may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ICL Israel Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, ICL Israel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Lavoro Limited and ICL Israel

The main advantage of trading using opposite Lavoro Limited and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lavoro Limited 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 Lavoro Limited Class 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.