Correlation Between Elbit Systems and Energix Renewable

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

By analyzing existing cross correlation between Elbit Systems and Energix Renewable Energies, you can compare the effects of market volatilities on Elbit Systems and Energix Renewable 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 Energix Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Systems and Energix Renewable.

Diversification Opportunities for Elbit Systems and Energix Renewable

-0.14

Correlation Coefficient

Elbit Systems  Energix Renewable

Good diversification

The 3 months correlation between Elbit and Energix is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Energix Renewable Energies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energix Renewable 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 Energix Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energix Renewable has no effect on the direction of Elbit Systems i.e., Elbit Systems and Energix Renewable go up and down completely randomly.

Pair Corralation between Elbit Systems and Energix Renewable

Assuming the 90 days trading horizon Elbit Systems is expected to generate 0.78 times more return on investment than Energix Renewable. However, Elbit Systems is 1.29 times less risky than Energix Renewable. It trades about 0.07 of its potential returns per unit of risk. Energix Renewable Energies is currently generating about -0.03 per unit of risk. If you would invest  10,799,000  in Elbit Systems on December 1, 2024 and sell it today you would earn a total of  153,000  from holding Elbit Systems or generate 1.42% return on investment over 90 days.

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

Elbit Systems  vs.  Energix Renewable Energies

Elbit Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 19 (%) 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.

Energix Renewable

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Elbit Systems and Energix Renewable

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

The idea behind Elbit Systems and Energix Renewable Energies 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.