Correlation Between Sanmina and Eltek

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

By analyzing existing cross correlation between Sanmina and Eltek, you can compare the effects of market volatilities on Sanmina and Eltek 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 Sanmina with a short position of Eltek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanmina and Eltek.

Diversification Opportunities for Sanmina and Eltek

0.57

Correlation Coefficient

Sanmina  Eltek

Very weak diversification

The 3 months correlation between Sanmina and Eltek is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sanmina and Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eltek and Sanmina 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 Sanmina are associated (or correlated) with Eltek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eltek has no effect on the direction of Sanmina i.e., Sanmina and Eltek go up and down completely randomly.

Pair Corralation between Sanmina and Eltek

Given the investment horizon of 90 days Sanmina is expected to under-perform the Eltek. But the stock apears to be less risky and, when comparing its historical volatility, Sanmina is 3.25 times less risky than Eltek. The stock trades about -0.25 of its potential returns per unit of risk. The Eltek is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,111  in Eltek on October 5, 2024 and sell it today you would lose (5.00) from holding Eltek or give up 0.45% of portfolio value over 90 days.

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

Sanmina  vs.  Eltek

Sanmina

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sanmina are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Sanmina displayed solid returns over the last few months and may actually be approaching a breakup point.

Eltek

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Eltek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sanmina and Eltek

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

The idea behind Sanmina and Eltek 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.