Correlation Between Enlight Renewable and El Al

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

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

Diversification Opportunities for Enlight Renewable and El Al

0.04

Correlation Coefficient

Enlight Renewable  El Al

Significant diversification

The 3 months correlation between Enlight and ELAL is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and El Al Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Al Israel and Enlight Renewable 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 Enlight Renewable Energy are associated (or correlated) with El Al. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Al Israel has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and El Al go up and down completely randomly.

Pair Corralation between Enlight Renewable and El Al

Assuming the 90 days trading horizon Enlight Renewable Energy is expected to under-perform the El Al. But the stock apears to be less risky and, when comparing its historical volatility, Enlight Renewable Energy is 1.47 times less risky than El Al. The stock trades about -0.02 of its potential returns per unit of risk. The El Al Israel is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  78,790  in El Al Israel on December 27, 2024 and sell it today you would earn a total of  41,010  from holding El Al Israel or generate 52.05% return on investment over 90 days.

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

Enlight Renewable Energy  vs.  El Al Israel

Enlight Renewable Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enlight Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

El Al Israel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in El Al Israel are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, El Al sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enlight Renewable and El Al

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

The idea behind Enlight Renewable Energy and El Al Israel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.