Correlation Between Kamada and ICL Israel

Can any of the company-specific risk be diversified away by investing in both Kamada and ICL Israel 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 Kamada and ICL Israel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kamada and ICL Israel Chemicals, you can compare the effects of market volatilities on Kamada and ICL Israel 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 Kamada with a short position of ICL Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kamada and ICL Israel.

Diversification Opportunities for Kamada and ICL Israel

0.59

Correlation Coefficient

Kamada  ICL Israel

Very weak diversification

The 3 months correlation between Kamada and ICL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and ICL Israel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICL Israel Chemicals and Kamada 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 Kamada are associated (or correlated) with ICL Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICL Israel Chemicals has no effect on the direction of Kamada i.e., Kamada and ICL Israel go up and down completely randomly.

Pair Corralation between Kamada and ICL Israel

Assuming the 90 days trading horizon Kamada is expected to generate 3.88 times less return on investment than ICL Israel. But when comparing it to its historical volatility, Kamada is 1.64 times less risky than ICL Israel. It trades about 0.08 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  147,058  in ICL Israel Chemicals on September 17, 2024 and sell it today you would earn a total of  36,342  from holding ICL Israel Chemicals or generate 24.71% return on investment over 90 days.

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

Kamada  vs.  ICL Israel Chemicals

Kamada

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kamada are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kamada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat weak essential indicators, ICL Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kamada and ICL Israel

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

The idea behind Kamada and ICL Israel Chemicals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.