Correlation Between Clal Insurance and Elbit Systems

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

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

Diversification Opportunities for Clal Insurance and Elbit Systems

0.63

Correlation Coefficient

Clal Insurance  Elbit Systems

Poor diversification

The 3 months correlation between Clal and Elbit is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Clal Insurance Enterprises and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Clal Insurance 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 Clal Insurance Enterprises 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 Clal Insurance i.e., Clal Insurance and Elbit Systems go up and down completely randomly.

Pair Corralation between Clal Insurance and Elbit Systems

Assuming the 90 days trading horizon Clal Insurance Enterprises is expected to under-perform the Elbit Systems. But the stock apears to be less risky and, when comparing its historical volatility, Clal Insurance Enterprises is 1.03 times less risky than Elbit Systems. The stock trades about -0.16 of its potential returns per unit of risk. The Elbit Systems is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  12,000,000  in Elbit Systems on December 30, 2024 and sell it today you would earn a total of  2,550,000  from holding Elbit Systems or generate 21.25% return on investment over 90 days.

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

Clal Insurance Enterprises  vs.  Elbit Systems

Clal Insurance Enter

Risk-Adjusted Performance

OK

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

Elbit Systems

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 26 (%) 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 Clal Insurance and Elbit Systems

The main advantage of trading using opposite Clal Insurance and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clal Insurance 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 Clal Insurance Enterprises 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.