Correlation Between ICL Israel and Imed Infinity

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

Diversification Opportunities for ICL Israel and Imed Infinity

-0.55

Correlation Coefficient

ICL Israel  Imed Infinity

Excellent diversification

The 3 months correlation between ICL and Imed is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Imed Infinity Medical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imed Infinity Medical 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 Imed Infinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imed Infinity Medical has no effect on the direction of ICL Israel i.e., ICL Israel and Imed Infinity go up and down completely randomly.

Pair Corralation between ICL Israel and Imed Infinity

Assuming the 90 days trading horizon ICL Israel Chemicals is expected to generate 1.29 times more return on investment than Imed Infinity. However, ICL Israel is 1.29 times more volatile than Imed Infinity Medical Limited. It trades about 0.11 of its potential returns per unit of risk. Imed Infinity Medical Limited is currently generating about -0.05 per unit of risk. If you would invest  158,324  in ICL Israel Chemicals on September 29, 2024 and sell it today you would earn a total of  19,676  from holding ICL Israel Chemicals or generate 12.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.87%
Values	Daily Returns

ICL Israel Chemicals  vs.  Imed Infinity Medical Limited

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.

Imed Infinity Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imed Infinity Medical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Imed Infinity 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 Imed Infinity

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

The idea behind ICL Israel Chemicals and Imed Infinity Medical Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.