Correlation Between Kamada and Elbit Systems

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

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

Diversification Opportunities for Kamada and Elbit Systems

0.84

Correlation Coefficient

Kamada  Elbit Systems

Very poor diversification

The 3 months correlation between Kamada and Elbit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Kamada 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 Kamada are associated (or correlated) with Elbit Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Systems has no effect on the direction of Kamada i.e., Kamada and Elbit Systems go up and down completely randomly.

Pair Corralation between Kamada and Elbit Systems

Given the investment horizon of 90 days Kamada is expected to generate 3.42 times less return on investment than Elbit Systems. But when comparing it to its historical volatility, Kamada is 1.3 times less risky than Elbit Systems. It trades about 0.11 of its potential returns per unit of risk. Elbit Systems is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  7,255,300  in Elbit Systems on September 23, 2024 and sell it today you would earn a total of  2,244,700  from holding Elbit Systems or generate 30.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	72.31%
Values	Daily Returns

Kamada  vs.  Elbit Systems

Kamada

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamada are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Kamada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Elbit Systems

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 23 (%) 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.

Pair Trading with Kamada and Elbit Systems

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

The idea behind Kamada and Elbit 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.