Correlation Between Disney and ICL Israel

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

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

Diversification Opportunities for Disney and ICL Israel

0.58

Correlation Coefficient

Disney ICL Israel

Very weak diversification

The 3 months correlation between Disney and ICL Israel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney 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 Disney 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 Walt Disney 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 Disney i.e., Disney and ICL Israel go up and down completely randomly.

Pair Corralation between Disney and ICL Israel

Considering the 90-day investment horizon Walt Disney is expected to under-perform the ICL Israel. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.24 times less risky than ICL Israel. The stock trades about -0.06 of its potential returns per unit of risk. The ICL Israel Chemicals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  541.00  in ICL Israel Chemicals on December 23, 2022 and sell it today you would earn a total of  122.00  from holding ICL Israel Chemicals or generate 22.55% return on investment over 90 days.

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

Walt Disney  vs.  ICL Israel Chemicals

Walt Disney

Disney Performance

7 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in April 2023.

ICL Israel Chemicals

ICL Israel Performance

0 of 100

Over the last 90 days ICL Israel Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, ICL Israel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Disney and ICL Israel

The main advantage of trading using opposite Disney and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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.

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The idea behind Walt Disney 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.