Correlation Between Eltek and Worthington Steel

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

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

Diversification Opportunities for Eltek and Worthington Steel

0.1

Correlation Coefficient

Eltek  Worthington Steel

Average diversification

The 3 months correlation between Eltek and Worthington is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Eltek i.e., Eltek and Worthington Steel go up and down completely randomly.

Pair Corralation between Eltek and Worthington Steel

Given the investment horizon of 90 days Eltek is expected to generate 0.68 times more return on investment than Worthington Steel. However, Eltek is 1.47 times less risky than Worthington Steel. It trades about 0.05 of its potential returns per unit of risk. Worthington Steel is currently generating about -0.04 per unit of risk. If you would invest  1,048  in Eltek on October 23, 2024 and sell it today you would earn a total of  59.00  from holding Eltek or generate 5.63% return on investment over 90 days.

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

Eltek  vs.  Worthington Steel

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 inconsistent basic indicators, Eltek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Worthington Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worthington Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Eltek and Worthington Steel

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

The idea behind Eltek and Worthington Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.