Correlation Between Elbit Systems and Bio View

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

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

Diversification Opportunities for Elbit Systems and Bio View

0.21

Correlation Coefficient

Elbit Systems  Bio View

Modest diversification

The 3 months correlation between Elbit and Bio is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Bio View in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio View and Elbit Systems 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 Elbit Systems are associated (or correlated) with Bio View. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio View has no effect on the direction of Elbit Systems i.e., Elbit Systems and Bio View go up and down completely randomly.

Pair Corralation between Elbit Systems and Bio View

Assuming the 90 days trading horizon Elbit Systems is expected to generate 0.22 times more return on investment than Bio View. However, Elbit Systems is 4.51 times less risky than Bio View. It trades about 0.08 of its potential returns per unit of risk. Bio View is currently generating about -0.07 per unit of risk. If you would invest  5,813,355  in Elbit Systems on September 4, 2024 and sell it today you would earn a total of  3,137,645  from holding Elbit Systems or generate 53.97% return on investment over 90 days.

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

Elbit Systems  vs.  Bio View

Elbit Systems

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elbit Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Bio View

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bio View are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bio View sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elbit Systems and Bio View

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

The idea behind Elbit Systems and Bio View 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.