Correlation Between Exxon and ICL Israel

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

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

Diversification Opportunities for Exxon and ICL Israel

0.64

Correlation Coefficient

Exxon ICL Israel

Poor diversification

The 3 months correlation between Exxon and ICL Israel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and ICL Israel go up and down completely randomly.

Pair Corralation between Exxon and ICL Israel

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.82 times more return on investment than ICL Israel. However, Exxon Mobil Corp is 1.22 times less risky than ICL Israel. It trades about 0.08 of its potential returns per unit of risk. ICL Israel Chemicals is currently generating about 0.03 per unit of risk. If you would invest  5,165  in Exxon Mobil Corp on December 23, 2022 and sell it today you would earn a total of  5,414  from holding Exxon Mobil Corp or generate 104.82% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  ICL Israel Chemicals

Exxon Mobil Corp

Exxon Performance

0 of 100

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

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 Exxon and ICL Israel

The main advantage of trading using opposite Exxon and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.