Correlation Between Elbit Systems and B Communications

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

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

Diversification Opportunities for Elbit Systems and B Communications

0.11

Correlation Coefficient

Elbit Systems  B Communications

Average diversification

The 3 months correlation between Elbit and BCOM is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Elbit Systems 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 Elbit Systems are associated (or correlated) with B Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Communications has no effect on the direction of Elbit Systems i.e., Elbit Systems and B Communications go up and down completely randomly.

Pair Corralation between Elbit Systems and B Communications

Assuming the 90 days trading horizon Elbit Systems is expected to under-perform the B Communications. But the stock apears to be less risky and, when comparing its historical volatility, Elbit Systems is 2.46 times less risky than B Communications. The stock trades about -0.17 of its potential returns per unit of risk. The B Communications is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  124,700  in B Communications on February 15, 2024 and sell it today you would earn a total of  13,000  from holding B Communications or generate 10.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Elbit Systems  vs.  B Communications

Elbit Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

B Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, B Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elbit Systems and B Communications

The main advantage of trading using opposite Elbit Systems and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elbit Systems position performs unexpectedly, B Communications 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 B Communications will offset losses from the drop in B Communications' long position.

The idea behind Elbit Systems and B Communications 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.