Correlation Between Elbit Systems and Evogene

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

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

Diversification Opportunities for Elbit Systems and Evogene

-0.86

Correlation Coefficient

Elbit Systems  Evogene

Pay attention - limited upside

The 3 months correlation between Elbit and Evogene is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Evogene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evogene 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 Evogene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evogene has no effect on the direction of Elbit Systems i.e., Elbit Systems and Evogene go up and down completely randomly.

Pair Corralation between Elbit Systems and Evogene

Assuming the 90 days trading horizon Elbit Systems is expected to generate 0.39 times more return on investment than Evogene. However, Elbit Systems is 2.56 times less risky than Evogene. It trades about 0.23 of its potential returns per unit of risk. Evogene is currently generating about -0.29 per unit of risk. If you would invest  7,285,281  in Elbit Systems on September 12, 2024 and sell it today you would earn a total of  1,528,719  from holding Elbit Systems or generate 20.98% return on investment over 90 days.

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

Elbit Systems  vs.  Evogene

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.

Evogene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evogene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Elbit Systems and Evogene

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

The idea behind Elbit Systems and Evogene 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.