Correlation Between Alps Electric and Eltek

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

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

Diversification Opportunities for Alps Electric and Eltek

-0.1

Correlation Coefficient

Alps Electric  Eltek

Good diversification

The 3 months correlation between Alps and Eltek is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Alps Electric Co and Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eltek and Alps Electric 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 Alps Electric Co are associated (or correlated) with Eltek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eltek has no effect on the direction of Alps Electric i.e., Alps Electric and Eltek go up and down completely randomly.

Pair Corralation between Alps Electric and Eltek

Assuming the 90 days horizon Alps Electric is expected to generate 5.68 times less return on investment than Eltek. But when comparing it to its historical volatility, Alps Electric Co is 1.88 times less risky than Eltek. It trades about 0.02 of its potential returns per unit of risk. Eltek is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  399.00  in Eltek on September 17, 2024 and sell it today you would earn a total of  703.00  from holding Eltek or generate 176.19% return on investment over 90 days.

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

Alps Electric Co  vs.  Eltek

Alps Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alps Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Alps Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Eltek

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Eltek is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alps Electric and Eltek

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

The idea behind Alps Electric Co and Eltek 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.