Correlation Between Eltek and Allient

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

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

Diversification Opportunities for Eltek and Allient

0.7

Correlation Coefficient

Eltek  Allient

Poor diversification

The 3 months correlation between Eltek and Allient is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient and Eltek 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 Eltek are associated (or correlated) with Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Eltek i.e., Eltek and Allient go up and down completely randomly.

Pair Corralation between Eltek and Allient

Given the investment horizon of 90 days Eltek is expected to generate 1.64 times more return on investment than Allient. However, Eltek is 1.64 times more volatile than Allient. It trades about 0.07 of its potential returns per unit of risk. Allient is currently generating about -0.01 per unit of risk. If you would invest  399.00  in Eltek on September 3, 2024 and sell it today you would earn a total of  705.00  from holding Eltek or generate 176.69% return on investment over 90 days.

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

Eltek  vs.  Allient

Eltek

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 3 (%) 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.

Allient

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eltek and Allient

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

The idea behind Eltek and Allient 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.