Correlation Between El Mor and Shapir Engineering

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

By analyzing existing cross correlation between El Mor Electric Installation and Shapir Engineering Industry, you can compare the effects of market volatilities on El Mor and Shapir Engineering 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 El Mor with a short position of Shapir Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Mor and Shapir Engineering.

Diversification Opportunities for El Mor and Shapir Engineering

0.86

Correlation Coefficient

El Mor  Shapir Engineering

Very poor diversification

The 3 months correlation between ELMR and Shapir is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding El Mor Electric Installation and Shapir Engineering Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shapir Engineering and El Mor 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 El Mor Electric Installation are associated (or correlated) with Shapir Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shapir Engineering has no effect on the direction of El Mor i.e., El Mor and Shapir Engineering go up and down completely randomly.

Pair Corralation between El Mor and Shapir Engineering

Assuming the 90 days trading horizon El Mor Electric Installation is expected to generate 1.4 times more return on investment than Shapir Engineering. However, El Mor is 1.4 times more volatile than Shapir Engineering Industry. It trades about 0.4 of its potential returns per unit of risk. Shapir Engineering Industry is currently generating about 0.05 per unit of risk. If you would invest  118,000  in El Mor Electric Installation on September 27, 2024 and sell it today you would earn a total of  26,000  from holding El Mor Electric Installation or generate 22.03% return on investment over 90 days.

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

El Mor Electric Installation  vs.  Shapir Engineering Industry

El Mor Electric

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in El Mor Electric Installation are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, El Mor sustained solid returns over the last few months and may actually be approaching a breakup point.

Shapir Engineering

Risk-Adjusted Performance

19 of 100

Solid

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

Pair Trading with El Mor and Shapir Engineering

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

The idea behind El Mor Electric Installation and Shapir Engineering Industry 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.