Correlation Between VMware and Elbit Systems
Can any of the company-specific risk be diversified away by investing in both VMware 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 VMware and Elbit Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and Elbit Systems, you can compare the effects of market volatilities on VMware 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 VMware with a short position of Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Elbit Systems.
Diversification Opportunities for VMware and Elbit Systems
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between VMware and Elbit is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and VMware 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 VMware Inc 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 VMware i.e., VMware and Elbit Systems go up and down completely randomly.
Pair Corralation between VMware and Elbit Systems
If you would invest 7,355,000 in Elbit Systems on January 18, 2024 and sell it today you would earn a total of 288,000 from holding Elbit Systems or generate 3.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 5.26% |
Values | Daily Returns |
VMware Inc vs. Elbit Systems
Performance |
Timeline |
VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Elbit Systems |
VMware and Elbit Systems Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with VMware and Elbit Systems
The main advantage of trading using opposite VMware and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware 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 VMware Inc 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. Arad | Elbit Systems vs. Alony Hetz Properties | Elbit Systems vs. Airport City | Elbit Systems vs. Harel Insurance Investments |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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