Correlation Between Elbit Systems and GE Aerospace

Can any of the company-specific risk be diversified away by investing in both Elbit Systems and GE 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 GE 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 GE Aerospace, you can compare the effects of market volatilities on Elbit Systems and GE 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Systems and GE Aerospace.

Diversification Opportunities for Elbit Systems and GE Aerospace

-0.3

Correlation Coefficient

Elbit Systems  GE Aerospace

Very good diversification

The 3 months correlation between Elbit and GE Aerospace is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Elbit Systems i.e., Elbit Systems and GE Aerospace go up and down completely randomly.

Pair Corralation between Elbit Systems and GE Aerospace

Given the investment horizon of 90 days Elbit Systems is expected to generate 0.89 times more return on investment than GE Aerospace. However, Elbit Systems is 1.12 times less risky than GE Aerospace. It trades about 0.21 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.02 per unit of risk. If you would invest  19,771  in Elbit Systems on September 12, 2024 and sell it today you would earn a total of  5,011  from holding Elbit Systems or generate 25.35% 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.  GE Aerospace

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. 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.

GE Aerospace

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GE Aerospace is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Elbit Systems and GE Aerospace

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

The idea behind Elbit Systems and GE 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.