Correlation Between Doral Group and Elbit Systems

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

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

Diversification Opportunities for Doral Group and Elbit Systems

0.22

Correlation Coefficient

Doral Group  Elbit Systems

Modest diversification

The 3 months correlation between Doral and Elbit is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Doral Group Renewable and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Doral Group 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 Doral Group Renewable 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 Doral Group i.e., Doral Group and Elbit Systems go up and down completely randomly.

Pair Corralation between Doral Group and Elbit Systems

Assuming the 90 days trading horizon Doral Group Renewable is expected to under-perform the Elbit Systems. In addition to that, Doral Group is 1.28 times more volatile than Elbit Systems. It trades about -0.07 of its total potential returns per unit of risk. Elbit Systems is currently generating about 0.19 per unit of volatility. If you would invest  7,488,150  in Elbit Systems on September 3, 2024 and sell it today you would earn a total of  1,331,850  from holding Elbit Systems or generate 17.79% return on investment over 90 days.

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

Doral Group Renewable  vs.  Elbit Systems

Doral Group Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doral Group Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Elbit Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 15 (%) 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 Doral Group and Elbit Systems

The main advantage of trading using opposite Doral Group and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doral Group 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 Doral Group Renewable 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.