Correlation Between Elbit Systems and Arad
Can any of the company-specific risk be diversified away by investing in both Elbit Systems and Arad 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 Elbit Systems and Arad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elbit Systems and Arad, you can compare the effects of market volatilities on Elbit Systems and Arad 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 Elbit Systems with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Systems and Arad.
Diversification Opportunities for Elbit Systems and Arad
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Elbit and Arad is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Elbit Systems 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 Elbit Systems are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Elbit Systems i.e., Elbit Systems and Arad go up and down completely randomly.
Pair Corralation between Elbit Systems and Arad
Assuming the 90 days trading horizon Elbit Systems is expected to generate 1.07 times less return on investment than Arad. In addition to that, Elbit Systems is 1.77 times more volatile than Arad. It trades about 0.25 of its total potential returns per unit of risk. Arad is currently generating about 0.49 per unit of volatility. If you would invest 503,500 in Arad on August 27, 2024 and sell it today you would earn a total of 45,800 from holding Arad or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elbit Systems vs. Arad
Performance |
| Timeline |
| Elbit Systems |
| Arad |
Elbit Systems and Arad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elbit Systems and Arad
The main advantage of trading using opposite Elbit Systems and Arad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elbit Systems position performs unexpectedly, Arad 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 Arad will offset losses from the drop in Arad's long position.| Elbit Systems vs. Arad | Elbit Systems vs. Alony Hetz Properties | Elbit Systems vs. Danel | Elbit Systems vs. Airport City |
| Arad vs. Automatic Bank Services | Arad vs. EN Shoham Business | Arad vs. Rapac Communication Infrastructure | Arad vs. Tadiran Hldg |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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