Correlation Between ICL Israel and Diplomat Holdings

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

Diversification Opportunities for ICL Israel and Diplomat Holdings

0.84

Correlation Coefficient

ICL Israel  Diplomat Holdings

Very poor diversification

The 3 months correlation between ICL and Diplomat is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Diplomat Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diplomat Holdings 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 Diplomat Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diplomat Holdings has no effect on the direction of ICL Israel i.e., ICL Israel and Diplomat Holdings go up and down completely randomly.

Pair Corralation between ICL Israel and Diplomat Holdings

Assuming the 90 days trading horizon ICL Israel Chemicals is expected to under-perform the Diplomat Holdings. In addition to that, ICL Israel is 1.03 times more volatile than Diplomat Holdings. It trades about -0.02 of its total potential returns per unit of risk. Diplomat Holdings is currently generating about 0.04 per unit of volatility. If you would invest  375,873  in Diplomat Holdings on September 14, 2024 and sell it today you would earn a total of  121,427  from holding Diplomat Holdings or generate 32.31% return on investment over 90 days.

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

ICL Israel Chemicals  vs.  Diplomat Holdings

ICL Israel Chemicals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 14 (%) 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.

Diplomat Holdings

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Diplomat Holdings are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Diplomat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICL Israel and Diplomat Holdings

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

The idea behind ICL Israel Chemicals and Diplomat Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.