Correlation Between ICL Israel and Alrov Properties

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

Diversification Opportunities for ICL Israel and Alrov Properties

0.79

Correlation Coefficient

ICL Israel  Alrov Properties

Poor diversification

The 3 months correlation between ICL and Alrov is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Alrov Properties Lodgings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alrov Properties Lodgings 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 Alrov Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alrov Properties Lodgings has no effect on the direction of ICL Israel i.e., ICL Israel and Alrov Properties go up and down completely randomly.

Pair Corralation between ICL Israel and Alrov Properties

Assuming the 90 days trading horizon ICL Israel is expected to generate 1.85 times less return on investment than Alrov Properties. In addition to that, ICL Israel is 1.89 times more volatile than Alrov Properties Lodgings. It trades about 0.1 of its total potential returns per unit of risk. Alrov Properties Lodgings is currently generating about 0.36 per unit of volatility. If you would invest  1,340,000  in Alrov Properties Lodgings on September 5, 2024 and sell it today you would earn a total of  340,000  from holding Alrov Properties Lodgings or generate 25.37% 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.  Alrov Properties Lodgings

ICL Israel Chemicals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 8 (%) 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.

Alrov Properties Lodgings

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alrov Properties Lodgings are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alrov Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICL Israel and Alrov Properties

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

The idea behind ICL Israel Chemicals and Alrov Properties Lodgings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.