Correlation Between Elbit Systems and Israel Shipyards

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Can any of the company-specific risk be diversified away by investing in both Elbit Systems and Israel Shipyards 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 Israel Shipyards into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elbit Systems and Israel Shipyards, you can compare the effects of market volatilities on Elbit Systems and Israel Shipyards 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 Israel Shipyards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Systems and Israel Shipyards.

Diversification Opportunities for Elbit Systems and Israel Shipyards

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Elbit and Israel is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Israel Shipyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Shipyards 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 Israel Shipyards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Shipyards has no effect on the direction of Elbit Systems i.e., Elbit Systems and Israel Shipyards go up and down completely randomly.

Pair Corralation between Elbit Systems and Israel Shipyards

Assuming the 90 days trading horizon Elbit Systems is expected to generate 3.12 times less return on investment than Israel Shipyards. But when comparing it to its historical volatility, Elbit Systems is 1.44 times less risky than Israel Shipyards. It trades about 0.09 of its potential returns per unit of risk. Israel Shipyards is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  725,000  in Israel Shipyards on September 1, 2024 and sell it today you would earn a total of  76,500  from holding Israel Shipyards or generate 10.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Elbit Systems  vs.  Israel Shipyards

 Performance 
       Timeline  
Elbit Systems 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elbit Systems sustained solid returns over the last few months and may actually be approaching a breakup point.
Israel Shipyards 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Israel Shipyards are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Israel Shipyards sustained solid returns over the last few months and may actually be approaching a breakup point.

Elbit Systems and Israel Shipyards Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Elbit Systems and Israel Shipyards

The main advantage of trading using opposite Elbit Systems and Israel Shipyards positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elbit Systems position performs unexpectedly, Israel Shipyards 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 Israel Shipyards will offset losses from the drop in Israel Shipyards' long position.
The idea behind Elbit Systems and Israel Shipyards 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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