Correlation Between Eltek and Giga Tronics

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

By analyzing existing cross correlation between Eltek and Giga tronics, you can compare the effects of market volatilities on Eltek and Giga Tronics 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 Giga Tronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eltek and Giga Tronics.

Diversification Opportunities for Eltek and Giga Tronics

-0.24

Correlation Coefficient

Eltek  Giga Tronics

Very good diversification

The 3 months correlation between Eltek and Giga is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Giga tronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giga tronics 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 Giga Tronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giga tronics has no effect on the direction of Eltek i.e., Eltek and Giga Tronics go up and down completely randomly.

Pair Corralation between Eltek and Giga Tronics

Given the investment horizon of 90 days Eltek is expected to generate 0.03 times more return on investment than Giga Tronics. However, Eltek is 29.45 times less risky than Giga Tronics. It trades about 0.07 of its potential returns per unit of risk. Giga tronics is currently generating about -0.5 per unit of risk. If you would invest  1,110  in Eltek on December 2, 2024 and sell it today you would earn a total of  48.00  from holding Eltek or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.0%
Values	Daily Returns

Eltek  vs.  Giga tronics

Eltek

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Eltek may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Giga tronics

Risk-Adjusted Performance

Good

Over the last 90 days Giga tronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat conflicting technical and fundamental indicators, Giga Tronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eltek and Giga Tronics

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

The idea behind Eltek and Giga tronics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.