Correlation Between Axilion Smart and Gilat Telecom

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

By analyzing existing cross correlation between Axilion Smart Mobility and Gilat Telecom Global, you can compare the effects of market volatilities on Axilion Smart and Gilat Telecom 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 Axilion Smart with a short position of Gilat Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axilion Smart and Gilat Telecom.

Diversification Opportunities for Axilion Smart and Gilat Telecom

0.51

Correlation Coefficient

Axilion Smart  Gilat Telecom

Very weak diversification

The 3 months correlation between Axilion and Gilat is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Axilion Smart Mobility and Gilat Telecom Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Telecom Global and Axilion Smart 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 Axilion Smart Mobility are associated (or correlated) with Gilat Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Telecom Global has no effect on the direction of Axilion Smart i.e., Axilion Smart and Gilat Telecom go up and down completely randomly.

Pair Corralation between Axilion Smart and Gilat Telecom

Assuming the 90 days trading horizon Axilion Smart is expected to generate 6.8 times less return on investment than Gilat Telecom. In addition to that, Axilion Smart is 1.5 times more volatile than Gilat Telecom Global. It trades about 0.04 of its total potential returns per unit of risk. Gilat Telecom Global is currently generating about 0.41 per unit of volatility. If you would invest  7,030  in Gilat Telecom Global on October 10, 2024 and sell it today you would earn a total of  1,320  from holding Gilat Telecom Global or generate 18.78% return on investment over 90 days.

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

Axilion Smart Mobility  vs.  Gilat Telecom Global

Axilion Smart Mobility

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axilion Smart Mobility are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Axilion Smart sustained solid returns over the last few months and may actually be approaching a breakup point.

Gilat Telecom Global

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Telecom Global are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gilat Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axilion Smart and Gilat Telecom

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

The idea behind Axilion Smart Mobility and Gilat Telecom Global 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.