Correlation Between Epitomee Medical and Elbit Imaging

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

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

Diversification Opportunities for Epitomee Medical and Elbit Imaging

0.77

Correlation Coefficient

Epitomee Medical  Elbit Imaging

Poor diversification

The 3 months correlation between Epitomee and Elbit is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Epitomee Medical and Elbit Imaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Imaging and Epitomee Medical 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 Epitomee Medical are associated (or correlated) with Elbit Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Imaging has no effect on the direction of Epitomee Medical i.e., Epitomee Medical and Elbit Imaging go up and down completely randomly.

Pair Corralation between Epitomee Medical and Elbit Imaging

Assuming the 90 days trading horizon Epitomee Medical is expected to under-perform the Elbit Imaging. But the stock apears to be less risky and, when comparing its historical volatility, Epitomee Medical is 2.27 times less risky than Elbit Imaging. The stock trades about -0.58 of its potential returns per unit of risk. The Elbit Imaging is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  37,040  in Elbit Imaging on January 31, 2024 and sell it today you would lose (1,940) from holding Elbit Imaging or give up 5.24% of portfolio value over 90 days.

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

Epitomee Medical  vs.  Elbit Imaging

Epitomee Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Epitomee Medical 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 somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Elbit Imaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elbit Imaging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Epitomee Medical and Elbit Imaging

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

The idea behind Epitomee Medical and Elbit Imaging 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.