Correlation Between Shaniv and Elbit Systems

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

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

Diversification Opportunities for Shaniv and Elbit Systems

0.85

Correlation Coefficient

Shaniv  Elbit Systems

Very poor diversification

The 3 months correlation between Shaniv and Elbit is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shaniv and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Shaniv 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 Shaniv 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 Shaniv i.e., Shaniv and Elbit Systems go up and down completely randomly.

Pair Corralation between Shaniv and Elbit Systems

Assuming the 90 days trading horizon Shaniv is expected to generate 1.17 times less return on investment than Elbit Systems. But when comparing it to its historical volatility, Shaniv is 1.08 times less risky than Elbit Systems. It trades about 0.24 of its potential returns per unit of risk. Elbit Systems is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,399,308  in Elbit Systems on September 29, 2024 and sell it today you would earn a total of  1,951,692  from holding Elbit Systems or generate 26.38% return on investment over 90 days.

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

Shaniv  vs.  Elbit Systems

Shaniv

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaniv are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaniv sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Shaniv and Elbit Systems

The main advantage of trading using opposite Shaniv and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaniv 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 Shaniv 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.