Correlation Between Elbit Systems and KWESST Micro

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

Diversification Opportunities for Elbit Systems and KWESST Micro

-0.87
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Elbit and KWESST is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and KWESST Micro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST Micro Systems 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 KWESST Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST Micro Systems has no effect on the direction of Elbit Systems i.e., Elbit Systems and KWESST Micro go up and down completely randomly.

Pair Corralation between Elbit Systems and KWESST Micro

Given the investment horizon of 90 days Elbit Systems is expected to generate 0.11 times more return on investment than KWESST Micro. However, Elbit Systems is 9.5 times less risky than KWESST Micro. It trades about 0.22 of its potential returns per unit of risk. KWESST Micro Systems is currently generating about -0.02 per unit of risk. If you would invest  19,787  in Elbit Systems on September 13, 2024 and sell it today you would earn a total of  5,352  from holding Elbit Systems or generate 27.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Elbit Systems  vs.  KWESST Micro Systems

 Performance 
       Timeline  
Elbit Systems 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Elbit Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.
KWESST Micro Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KWESST Micro Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Elbit Systems and KWESST Micro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Elbit Systems and KWESST Micro

The main advantage of trading using opposite Elbit Systems and KWESST Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elbit Systems position performs unexpectedly, KWESST Micro 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 KWESST Micro will offset losses from the drop in KWESST Micro's long position.
The idea behind Elbit Systems and KWESST Micro Systems 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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