Correlation Between Sure Tech and Gilat Telecom

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

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

Diversification Opportunities for Sure Tech and Gilat Telecom

0.55

Correlation Coefficient

Sure Tech  Gilat Telecom

Very weak diversification

The 3 months correlation between Sure and Gilat is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sure Tech Investments LP and Gilat Telecom Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Telecom Global and Sure Tech 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 Sure Tech Investments LP are associated (or correlated) with Gilat Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Telecom Global has no effect on the direction of Sure Tech i.e., Sure Tech and Gilat Telecom go up and down completely randomly.

Pair Corralation between Sure Tech and Gilat Telecom

Assuming the 90 days trading horizon Sure Tech Investments LP is expected to generate 1.59 times more return on investment than Gilat Telecom. However, Sure Tech is 1.59 times more volatile than Gilat Telecom Global. It trades about 0.31 of its potential returns per unit of risk. Gilat Telecom Global is currently generating about 0.24 per unit of risk. If you would invest  56,370  in Sure Tech Investments LP on October 10, 2024 and sell it today you would earn a total of  15,040  from holding Sure Tech Investments LP or generate 26.68% return on investment over 90 days.

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

Sure Tech Investments LP  vs.  Gilat Telecom Global

Sure Tech Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sure Tech Investments LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sure Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Gilat Telecom Global

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Telecom Global are ranked lower than 15 (%) 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.

Pair Trading with Sure Tech and Gilat Telecom

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

The idea behind Sure Tech Investments LP and Gilat Telecom Global 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.