Correlation Between Elbit Systems and Vertical Aerospace

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

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

Diversification Opportunities for Elbit Systems and Vertical Aerospace

-0.69

Correlation Coefficient

Elbit Systems  Vertical Aerospace

Excellent diversification

The 3 months correlation between Elbit and Vertical is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Vertical Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertical Aerospace 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 Vertical Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertical Aerospace has no effect on the direction of Elbit Systems i.e., Elbit Systems and Vertical Aerospace go up and down completely randomly.

Pair Corralation between Elbit Systems and Vertical Aerospace

Given the investment horizon of 90 days Elbit Systems is expected to generate 0.25 times more return on investment than Vertical Aerospace. However, Elbit Systems is 3.96 times less risky than Vertical Aerospace. It trades about 0.33 of its potential returns per unit of risk. Vertical Aerospace is currently generating about -0.19 per unit of risk. If you would invest  25,860  in Elbit Systems on December 29, 2024 and sell it today you would earn a total of  13,386  from holding Elbit Systems or generate 51.76% 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.  Vertical Aerospace

Elbit Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Elbit Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vertical Aerospace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vertical Aerospace 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 quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Elbit Systems and Vertical Aerospace

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

The idea behind Elbit Systems and Vertical Aerospace 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.