Correlation Between ICL Israel and Nutrien

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

Diversification Opportunities for ICL Israel and Nutrien

0.58

Correlation Coefficient

ICL Israel  Nutrien

Very weak diversification

The 3 months correlation between ICL and Nutrien is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of ICL Israel i.e., ICL Israel and Nutrien go up and down completely randomly.

Pair Corralation between ICL Israel and Nutrien

Considering the 90-day investment horizon ICL Israel Chemicals is expected to under-perform the Nutrien. In addition to that, ICL Israel is 1.17 times more volatile than Nutrien. It trades about -0.29 of its total potential returns per unit of risk. Nutrien is currently generating about -0.02 per unit of volatility. If you would invest  5,310  in Nutrien on January 20, 2024 and sell it today you would lose (45.00) from holding Nutrien or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

ICL Israel Chemicals  vs.  Nutrien

ICL Israel Chemicals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 3 (%) 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.

Nutrien

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nutrien is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ICL Israel and Nutrien

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

The idea behind ICL Israel Chemicals and Nutrien 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.