Correlation Between Elbit Systems and Compugen

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

By analyzing existing cross correlation between Elbit Systems and Compugen, you can compare the effects of market volatilities on Elbit Systems and Compugen 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 Compugen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Systems and Compugen.

Diversification Opportunities for Elbit Systems and Compugen

-0.9

Correlation Coefficient

Elbit Systems  Compugen

Pay attention - limited upside

The 3 months correlation between Elbit and Compugen is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Compugen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugen 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 Compugen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugen has no effect on the direction of Elbit Systems i.e., Elbit Systems and Compugen go up and down completely randomly.

Pair Corralation between Elbit Systems and Compugen

Assuming the 90 days trading horizon Elbit Systems is expected to generate 5.28 times less return on investment than Compugen. But when comparing it to its historical volatility, Elbit Systems is 6.18 times less risky than Compugen. It trades about 0.05 of its potential returns per unit of risk. Compugen is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  42,200  in Compugen on September 30, 2024 and sell it today you would earn a total of  15,700  from holding Compugen or generate 37.2% return on investment over 90 days.

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

Elbit Systems  vs.  Compugen

Elbit Systems

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 20 (%) 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.

Compugen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compugen 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.

Pair Trading with Elbit Systems and Compugen

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

The idea behind Elbit Systems and Compugen 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.