Correlation Between Elbit Medical and Brainsway

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

By analyzing existing cross correlation between Elbit Medical Technologies and Brainsway, you can compare the effects of market volatilities on Elbit Medical and Brainsway 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 Medical with a short position of Brainsway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Medical and Brainsway.

Diversification Opportunities for Elbit Medical and Brainsway

0.75

Correlation Coefficient

Elbit Medical  Brainsway

Poor diversification

The 3 months correlation between Elbit and Brainsway is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Medical Technologies and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway and Elbit Medical 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 Medical Technologies are associated (or correlated) with Brainsway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainsway has no effect on the direction of Elbit Medical i.e., Elbit Medical and Brainsway go up and down completely randomly.

Pair Corralation between Elbit Medical and Brainsway

Assuming the 90 days trading horizon Elbit Medical Technologies is expected to under-perform the Brainsway. In addition to that, Elbit Medical is 1.42 times more volatile than Brainsway. It trades about -0.31 of its total potential returns per unit of risk. Brainsway is currently generating about -0.05 per unit of volatility. If you would invest  179,900  in Brainsway on September 27, 2024 and sell it today you would lose (5,300) from holding Brainsway or give up 2.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Elbit Medical Technologies  vs.  Brainsway

Elbit Medical Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elbit Medical Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Brainsway

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brainsway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elbit Medical and Brainsway

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

The idea behind Elbit Medical Technologies and Brainsway 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.