Correlation Between Opko Health and Elbit Systems

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

Diversification Opportunities for Opko Health and Elbit Systems

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Opko and Elbit is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Opko Health and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Opko Health 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 Opko Health 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 Opko Health i.e., Opko Health and Elbit Systems go up and down completely randomly.

Pair Corralation between Opko Health and Elbit Systems

Assuming the 90 days trading horizon Opko Health is expected to generate 3.47 times more return on investment than Elbit Systems. However, Opko Health is 3.47 times more volatile than Elbit Systems. It trades about 0.35 of its potential returns per unit of risk. Elbit Systems is currently generating about -0.12 per unit of risk. If you would invest  34,670  in Opko Health on December 29, 2023 and sell it today you would earn a total of  9,230  from holding Opko Health or generate 26.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy94.44%
ValuesDaily Returns

Opko Health  vs.  Elbit Systems

 Performance 
       Timeline  
Opko Health 

Risk-Adjusted Performance

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Over the last 90 days Opko Health 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 forward-looking signals remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Elbit Systems 

Risk-Adjusted Performance

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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 somewhat strong basic indicators, Elbit Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Opko Health and Elbit Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Opko Health and Elbit Systems

The main advantage of trading using opposite Opko Health and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opko Health 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 Opko Health 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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