Correlation Between ICL Israel and FMC

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

Diversification Opportunities for ICL Israel and FMC

0.47

Correlation Coefficient

ICL Israel  FMC

Very weak diversification

The 3 months correlation between ICL and FMC is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation 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 FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of ICL Israel i.e., ICL Israel and FMC go up and down completely randomly.

Pair Corralation between ICL Israel and FMC

Considering the 90-day investment horizon ICL Israel Chemicals is expected to under-perform the FMC. But the stock apears to be less risky and, when comparing its historical volatility, ICL Israel Chemicals is 1.54 times less risky than FMC. The stock trades about -0.3 of its potential returns per unit of risk. The FMC Corporation is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  6,224  in FMC Corporation on January 24, 2024 and sell it today you would lose (359.00) from holding FMC Corporation or give up 5.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

ICL Israel Chemicals  vs.  FMC Corp.

ICL Israel Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, ICL Israel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

FMC Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FMC Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, FMC may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ICL Israel and FMC

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

The idea behind ICL Israel Chemicals and FMC Corporation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.