Correlation Between Sofwave Medical and Elbit Imaging

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

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

Diversification Opportunities for Sofwave Medical and Elbit Imaging

-0.2

Correlation Coefficient

Sofwave Medical  Elbit Imaging

Good diversification

The 3 months correlation between Sofwave and Elbit is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sofwave Medical and Elbit Imaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Imaging and Sofwave 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 Sofwave Medical are associated (or correlated) with Elbit Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Imaging has no effect on the direction of Sofwave Medical i.e., Sofwave Medical and Elbit Imaging go up and down completely randomly.

Pair Corralation between Sofwave Medical and Elbit Imaging

Assuming the 90 days trading horizon Sofwave Medical is expected to under-perform the Elbit Imaging. But the stock apears to be less risky and, when comparing its historical volatility, Sofwave Medical is 1.18 times less risky than Elbit Imaging. The stock trades about -0.25 of its potential returns per unit of risk. The Elbit Imaging is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  52,500  in Elbit Imaging on September 28, 2024 and sell it today you would earn a total of  7,500  from holding Elbit Imaging or generate 14.29% return on investment over 90 days.

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

Sofwave Medical  vs.  Elbit Imaging

Sofwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofwave Medical 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.

Elbit Imaging

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Imaging are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Elbit Imaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sofwave Medical and Elbit Imaging

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

The idea behind Sofwave Medical and Elbit Imaging 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..