Correlation Between Elron Electronic and Orbit Technologies

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

By analyzing existing cross correlation between Elron Electronic Industries and Orbit Technologies, you can compare the effects of market volatilities on Elron Electronic and Orbit Technologies 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 Elron Electronic with a short position of Orbit Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elron Electronic and Orbit Technologies.

Diversification Opportunities for Elron Electronic and Orbit Technologies

0.35

Correlation Coefficient

Elron Electronic  Orbit Technologies

Weak diversification

The 3 months correlation between Elron and Orbit is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Elron Electronic Industries and Orbit Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbit Technologies and Elron Electronic 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 Elron Electronic Industries are associated (or correlated) with Orbit Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbit Technologies has no effect on the direction of Elron Electronic i.e., Elron Electronic and Orbit Technologies go up and down completely randomly.

Pair Corralation between Elron Electronic and Orbit Technologies

Assuming the 90 days trading horizon Elron Electronic Industries is expected to generate 0.88 times more return on investment than Orbit Technologies. However, Elron Electronic Industries is 1.14 times less risky than Orbit Technologies. It trades about 0.12 of its potential returns per unit of risk. Orbit Technologies is currently generating about 0.1 per unit of risk. If you would invest  41,210  in Elron Electronic Industries on December 30, 2024 and sell it today you would earn a total of  4,990  from holding Elron Electronic Industries or generate 12.11% return on investment over 90 days.

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

Elron Electronic Industries  vs.  Orbit Technologies

Elron Electronic Ind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elron Electronic Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elron Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Orbit Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orbit Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orbit Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elron Electronic and Orbit Technologies

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

The idea behind Elron Electronic Industries and Orbit Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.