Correlation Between RSL Electronics and Elbit Systems
Can any of the company-specific risk be diversified away by investing in both RSL Electronics 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 RSL Electronics and Elbit Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RSL Electronics and Elbit Systems, you can compare the effects of market volatilities on RSL Electronics 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 RSL Electronics with a short position of Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of RSL Electronics and Elbit Systems.
Diversification Opportunities for RSL Electronics and Elbit Systems
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between RSL and Elbit is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding RSL Electronics and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and RSL Electronics 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 RSL Electronics 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 RSL Electronics i.e., RSL Electronics and Elbit Systems go up and down completely randomly.
Pair Corralation between RSL Electronics and Elbit Systems
Assuming the 90 days trading horizon RSL Electronics is expected to generate 3.01 times more return on investment than Elbit Systems. However, RSL Electronics is 3.01 times more volatile than Elbit Systems. It trades about 0.13 of its potential returns per unit of risk. Elbit Systems is currently generating about 0.04 per unit of risk. If you would invest 67,969 in RSL Electronics on January 25, 2024 and sell it today you would earn a total of 5,831 from holding RSL Electronics or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RSL Electronics vs. Elbit Systems
Performance |
| Timeline |
| RSL Electronics |
| Elbit Systems |
RSL Electronics and Elbit Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RSL Electronics and Elbit Systems
The main advantage of trading using opposite RSL Electronics and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RSL Electronics 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.| RSL Electronics vs. Alony Hetz Properties | RSL Electronics vs. Melisron | RSL Electronics vs. Shufersal | RSL Electronics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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