Correlation Between Wesure Global and ICL Israel

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

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

Diversification Opportunities for Wesure Global and ICL Israel

0.83

Correlation Coefficient

Wesure Global  ICL Israel

Very poor diversification

The 3 months correlation between Wesure and ICL is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wesure Global Tech 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 Wesure Global 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 Wesure Global Tech 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 Wesure Global i.e., Wesure Global and ICL Israel go up and down completely randomly.

Pair Corralation between Wesure Global and ICL Israel

Assuming the 90 days trading horizon Wesure Global Tech is expected to generate 0.95 times more return on investment than ICL Israel. However, Wesure Global Tech is 1.05 times less risky than ICL Israel. It trades about 0.49 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about 0.18 per unit of risk. If you would invest  30,330  in Wesure Global Tech on September 15, 2024 and sell it today you would earn a total of  22,640  from holding Wesure Global Tech or generate 74.65% return on investment over 90 days.

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

Wesure Global Tech  vs.  ICL Israel Chemicals

Wesure Global Tech

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Wesure Global Tech are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wesure Global sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Wesure Global and ICL Israel

The main advantage of trading using opposite Wesure Global and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesure Global 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 Wesure Global Tech 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.