Correlation Between PCB Tec and Elbit Systems
Can any of the company-specific risk be diversified away by investing in both PCB Tec 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 PCB Tec and Elbit Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PCB Tec and Elbit Systems, you can compare the effects of market volatilities on PCB Tec 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 PCB Tec with a short position of Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of PCB Tec and Elbit Systems.
Diversification Opportunities for PCB Tec and Elbit Systems
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PCB and Elbit is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PCB Tec and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and PCB Tec 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 PCB Tec 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 PCB Tec i.e., PCB Tec and Elbit Systems go up and down completely randomly.
Pair Corralation between PCB Tec and Elbit Systems
Assuming the 90 days trading horizon PCB Tec is expected to under-perform the Elbit Systems. In addition to that, PCB Tec is 2.26 times more volatile than Elbit Systems. It trades about -0.13 of its total potential returns per unit of risk. Elbit Systems is currently generating about -0.12 per unit of volatility. If you would invest 7,945,000 in Elbit Systems on January 24, 2024 and sell it today you would lose (390,000) from holding Elbit Systems or give up 4.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PCB Tec vs. Elbit Systems
Performance |
| Timeline |
| PCB Tec |
| Elbit Systems |
PCB Tec and Elbit Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PCB Tec and Elbit Systems
The main advantage of trading using opposite PCB Tec and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PCB Tec 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 PCB Tec 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.| Elbit Systems vs. Al Bad Massuot Yitzhak | Elbit Systems vs. Gan Shmuel | Elbit Systems vs. Analyst IMS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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