Can any of the company-specific risk be diversified away by investing in both ICL Israel and IBI Mutual 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 IBI Mutual 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 IBI Mutual Funds, you can compare the effects of market volatilities on ICL Israel and IBI Mutual 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 IBI Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and IBI Mutual.
Diversification Opportunities for ICL Israel and IBI Mutual
The 3 months correlation between ICL and IBI is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and IBI Mutual Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBI Mutual Funds 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 IBI Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBI Mutual Funds has no effect on the direction of ICL Israel i.e., ICL Israel and IBI Mutual go up and down completely randomly.
Pair Corralation between ICL Israel and IBI Mutual
Assuming the 90 days trading horizon ICL Israel Chemicals is expected to under-perform the IBI Mutual. In addition to that, ICL Israel is 1.34 times more volatile than IBI Mutual Funds. It trades about -0.03 of its total potential returns per unit of risk. IBI Mutual Funds is currently generating about 0.08 per unit of volatility. If you would invest 6,680 in IBI Mutual Funds on March 6, 2024 and sell it today you would earn a total of 100.00 from holding IBI Mutual Funds or generate 1.5% return on investment over 90 days.
Over the last 90 days ICL Israel Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Compared to the overall equity markets, risk-adjusted returns on investments in IBI Mutual Funds are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, IBI Mutual may actually be approaching a critical reversion point that can send shares even higher in July 2024.