Correlation Between ICL Israel and Victory Supermarket

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

Diversification Opportunities for ICL Israel and Victory Supermarket

0.72

Correlation Coefficient

ICL Israel  Victory Supermarket

Poor diversification

The 3 months correlation between ICL and Victory is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Victory Supermarket Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Supermarket Chain 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 Victory Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Supermarket Chain has no effect on the direction of ICL Israel i.e., ICL Israel and Victory Supermarket go up and down completely randomly.

Pair Corralation between ICL Israel and Victory Supermarket

Assuming the 90 days trading horizon ICL Israel Chemicals is expected to generate 1.77 times more return on investment than Victory Supermarket. However, ICL Israel is 1.77 times more volatile than Victory Supermarket Chain. It trades about 0.22 of its potential returns per unit of risk. Victory Supermarket Chain is currently generating about 0.23 per unit of risk. If you would invest  163,508  in ICL Israel Chemicals on September 29, 2024 and sell it today you would earn a total of  14,492  from holding ICL Israel Chemicals or generate 8.86% 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.  Victory Supermarket Chain

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.

Victory Supermarket Chain

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Supermarket Chain are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Victory Supermarket sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICL Israel and Victory Supermarket

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

The idea behind ICL Israel Chemicals and Victory Supermarket Chain 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.