Correlation Between IMCO Industries and Elbit Systems

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Can any of the company-specific risk be diversified away by investing in both IMCO Industries and Elbit Systems 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 IMCO Industries and Elbit Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMCO Industries and Elbit Systems, you can compare the effects of market volatilities on IMCO Industries and Elbit Systems 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 IMCO Industries with a short position of Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMCO Industries and Elbit Systems.

Diversification Opportunities for IMCO Industries and Elbit Systems

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between IMCO and Elbit is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding IMCO Industries and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and IMCO Industries 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 IMCO Industries are associated (or correlated) with Elbit Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Systems has no effect on the direction of IMCO Industries i.e., IMCO Industries and Elbit Systems go up and down completely randomly.

Pair Corralation between IMCO Industries and Elbit Systems

Assuming the 90 days trading horizon IMCO Industries is expected to generate 1.67 times more return on investment than Elbit Systems. However, IMCO Industries is 1.67 times more volatile than Elbit Systems. It trades about 0.05 of its potential returns per unit of risk. Elbit Systems is currently generating about 0.02 per unit of risk. If you would invest  168,900  in IMCO Industries on December 19, 2023 and sell it today you would earn a total of  83,900  from holding IMCO Industries or generate 49.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

IMCO Industries  vs.  Elbit Systems

 Performance 
       Timeline  
IMCO Industries 

Risk-Adjusted Performance

26 of 100

 
Low
 
High
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in IMCO Industries are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IMCO Industries sustained solid returns over the last few months and may actually be approaching a breakup point.
Elbit Systems 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Elbit Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

IMCO Industries and Elbit Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IMCO Industries and Elbit Systems

The main advantage of trading using opposite IMCO Industries and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMCO Industries position performs unexpectedly, Elbit Systems 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 Systems will offset losses from the drop in Elbit Systems' long position.
The idea behind IMCO Industries and Elbit Systems 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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