Correlation Between Applied Opt and Gilat Satellite

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

By analyzing existing cross correlation between Applied Opt and Gilat Satellite Networks, you can compare the effects of market volatilities on Applied Opt and Gilat Satellite 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 Applied Opt with a short position of Gilat Satellite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Opt and Gilat Satellite.

Diversification Opportunities for Applied Opt and Gilat Satellite

0.65

Correlation Coefficient

Applied Opt  Gilat Satellite

Poor diversification

The 3 months correlation between Applied and Gilat is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Applied Opt and Gilat Satellite Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Satellite Networks and Applied Opt 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 Applied Opt are associated (or correlated) with Gilat Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Satellite Networks has no effect on the direction of Applied Opt i.e., Applied Opt and Gilat Satellite go up and down completely randomly.

Pair Corralation between Applied Opt and Gilat Satellite

Given the investment horizon of 90 days Applied Opt is expected to generate 3.14 times more return on investment than Gilat Satellite. However, Applied Opt is 3.14 times more volatile than Gilat Satellite Networks. It trades about 0.25 of its potential returns per unit of risk. Gilat Satellite Networks is currently generating about 0.13 per unit of risk. If you would invest  1,226  in Applied Opt on September 2, 2024 and sell it today you would earn a total of  2,896  from holding Applied Opt or generate 236.22% return on investment over 90 days.

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

Applied Opt  vs.  Gilat Satellite Networks

Applied Opt

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Opt are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Applied Opt demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Gilat Satellite Networks

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Satellite Networks are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Gilat Satellite unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Opt and Gilat Satellite

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

The idea behind Applied Opt and Gilat Satellite Networks 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.