Correlation Between ICL Israel and Matrix

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

Diversification Opportunities for ICL Israel and Matrix

0.88

Correlation Coefficient

ICL Israel  Matrix

Very poor diversification

The 3 months correlation between ICL and Matrix is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Matrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix 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 Matrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix has no effect on the direction of ICL Israel i.e., ICL Israel and Matrix go up and down completely randomly.

Pair Corralation between ICL Israel and Matrix

Assuming the 90 days trading horizon ICL Israel is expected to generate 1.07 times less return on investment than Matrix. In addition to that, ICL Israel is 1.64 times more volatile than Matrix. It trades about 0.18 of its total potential returns per unit of risk. Matrix is currently generating about 0.32 per unit of volatility. If you would invest  700,475  in Matrix on September 16, 2024 and sell it today you would earn a total of  186,625  from holding Matrix or generate 26.64% 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.  Matrix

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.

Matrix

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Matrix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICL Israel and Matrix

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

The idea behind ICL Israel Chemicals and Matrix 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.