Correlation Between Ehang Holdings and Elbit Systems

Can any of the company-specific risk be diversified away by investing in both Ehang Holdings 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 Ehang Holdings and Elbit Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ehang Holdings and Elbit Systems, you can compare the effects of market volatilities on Ehang Holdings 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 Ehang Holdings with a short position of Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ehang Holdings and Elbit Systems.

Diversification Opportunities for Ehang Holdings and Elbit Systems

-0.44

Correlation Coefficient

Ehang Holdings  Elbit Systems

Very good diversification

The 3 months correlation between Ehang and Elbit is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ehang Holdings and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Ehang Holdings 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 Ehang Holdings 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 Ehang Holdings i.e., Ehang Holdings and Elbit Systems go up and down completely randomly.

Pair Corralation between Ehang Holdings and Elbit Systems

Allowing for the 90-day total investment horizon Ehang Holdings is expected to generate 3.83 times more return on investment than Elbit Systems. However, Ehang Holdings is 3.83 times more volatile than Elbit Systems. It trades about 0.05 of its potential returns per unit of risk. Elbit Systems is currently generating about -0.02 per unit of risk. If you would invest  1,791  in Ehang Holdings on January 19, 2024 and sell it today you would earn a total of  50.00  from holding Ehang Holdings or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ehang Holdings  vs.  Elbit Systems

Ehang Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ehang Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical indicators, Ehang Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Elbit Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elbit Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Elbit Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ehang Holdings and Elbit Systems

The main advantage of trading using opposite Ehang Holdings and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ehang Holdings 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 Ehang Holdings 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.