Correlation Between Gilat Telecom and Millennium Food

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

By analyzing existing cross correlation between Gilat Telecom Global and Millennium Food Tech LP, you can compare the effects of market volatilities on Gilat Telecom and Millennium Food 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 Gilat Telecom with a short position of Millennium Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilat Telecom and Millennium Food.

Diversification Opportunities for Gilat Telecom and Millennium Food

-0.24

Correlation Coefficient

Gilat Telecom  Millennium Food

Very good diversification

The 3 months correlation between Gilat and Millennium is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gilat Telecom Global and Millennium Food Tech LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millennium Food Tech and Gilat Telecom 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 Gilat Telecom Global are associated (or correlated) with Millennium Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millennium Food Tech has no effect on the direction of Gilat Telecom i.e., Gilat Telecom and Millennium Food go up and down completely randomly.

Pair Corralation between Gilat Telecom and Millennium Food

Assuming the 90 days trading horizon Gilat Telecom Global is expected to generate 0.69 times more return on investment than Millennium Food. However, Gilat Telecom Global is 1.44 times less risky than Millennium Food. It trades about 0.19 of its potential returns per unit of risk. Millennium Food Tech LP is currently generating about 0.03 per unit of risk. If you would invest  6,700  in Gilat Telecom Global on October 26, 2024 and sell it today you would earn a total of  1,290  from holding Gilat Telecom Global or generate 19.25% return on investment over 90 days.

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

Gilat Telecom Global  vs.  Millennium Food Tech LP

Gilat Telecom Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Telecom Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gilat Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Millennium Food Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gilat Telecom and Millennium Food

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

The idea behind Gilat Telecom Global and Millennium Food Tech LP 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.