Correlation Between Mehadrin and Elbit Systems
Can any of the company-specific risk be diversified away by investing in both Mehadrin 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 Mehadrin and Elbit Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mehadrin and Elbit Systems, you can compare the effects of market volatilities on Mehadrin 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 Mehadrin with a short position of Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mehadrin and Elbit Systems.
Diversification Opportunities for Mehadrin and Elbit Systems
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Mehadrin and Elbit is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mehadrin and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Mehadrin 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 Mehadrin 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 Mehadrin i.e., Mehadrin and Elbit Systems go up and down completely randomly.
Pair Corralation between Mehadrin and Elbit Systems
Assuming the 90 days trading horizon Mehadrin is expected to under-perform the Elbit Systems. In addition to that, Mehadrin is 1.37 times more volatile than Elbit Systems. It trades about -0.12 of its total potential returns per unit of risk. Elbit Systems is currently generating about 0.02 per unit of volatility. If you would invest 7,527,000 in Elbit Systems on January 26, 2024 and sell it today you would earn a total of 28,000 from holding Elbit Systems or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mehadrin vs. Elbit Systems
Performance |
| Timeline |
| Mehadrin |
| Elbit Systems |
Mehadrin and Elbit Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mehadrin and Elbit Systems
The main advantage of trading using opposite Mehadrin and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mehadrin 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.| Mehadrin vs. Bezeq Israeli Telecommunication | Mehadrin vs. Bank Hapoalim | Mehadrin vs. Bank Leumi Le Israel | Mehadrin vs. Israel Discount Bank |
| Elbit Systems vs. Alony Hetz Properties | Elbit Systems vs. Melisron | Elbit Systems vs. Shufersal | Elbit Systems vs. Israel Discount Bank |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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