Correlation Between Elbit Systems and GODM Investments

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

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

Diversification Opportunities for Elbit Systems and GODM Investments

-0.76

Correlation Coefficient

Elbit Systems  GODM Investments

Pay attention - limited upside

The 3 months correlation between Elbit and GODM is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and GODM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GODM Investments 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 GODM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GODM Investments has no effect on the direction of Elbit Systems i.e., Elbit Systems and GODM Investments go up and down completely randomly.

Pair Corralation between Elbit Systems and GODM Investments

Assuming the 90 days trading horizon Elbit Systems is expected to generate 0.86 times more return on investment than GODM Investments. However, Elbit Systems is 1.17 times less risky than GODM Investments. It trades about 0.11 of its potential returns per unit of risk. GODM Investments is currently generating about -0.24 per unit of risk. If you would invest  8,625,000  in Elbit Systems on September 5, 2024 and sell it today you would earn a total of  326,000  from holding Elbit Systems or generate 3.78% return on investment over 90 days.

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

Elbit Systems  vs.  GODM Investments

Elbit Systems

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 16 (%) 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.

GODM Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GODM Investments 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 GODM Investments

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

The idea behind Elbit Systems and GODM Investments 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.