Correlation Between ICL Israel and China Green

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

Diversification Opportunities for ICL Israel and China Green

0.06

Correlation Coefficient

ICL Israel  China Green

Significant diversification

The 3 months correlation between ICL and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and China Green Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Green Agriculture 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 China Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Green Agriculture has no effect on the direction of ICL Israel i.e., ICL Israel and China Green go up and down completely randomly.

Pair Corralation between ICL Israel and China Green

Considering the 90-day investment horizon ICL Israel is expected to generate 1.06 times less return on investment than China Green. But when comparing it to its historical volatility, ICL Israel Chemicals is 3.92 times less risky than China Green. It trades about 0.19 of its potential returns per unit of risk. China Green Agriculture is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  187.00  in China Green Agriculture on September 16, 2024 and sell it today you would earn a total of  11.00  from holding China Green Agriculture or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

ICL Israel Chemicals  vs.  China Green Agriculture

ICL Israel Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, ICL Israel disclosed solid returns over the last few months and may actually be approaching a breakup point.

China Green Agriculture

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days China Green Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating technical and fundamental indicators, China Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICL Israel and China Green

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

The idea behind ICL Israel Chemicals and China Green Agriculture 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.