Correlation Between Elbit Systems and Nextcom

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

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

Diversification Opportunities for Elbit Systems and Nextcom

0.09

Correlation Coefficient

Elbit Systems  Nextcom

Significant diversification

The 3 months correlation between Elbit and Nextcom is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Nextcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextcom 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 Nextcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextcom has no effect on the direction of Elbit Systems i.e., Elbit Systems and Nextcom go up and down completely randomly.

Pair Corralation between Elbit Systems and Nextcom

Assuming the 90 days trading horizon Elbit Systems is expected to under-perform the Nextcom. In addition to that, Elbit Systems is 1.08 times more volatile than Nextcom. It trades about -0.39 of its total potential returns per unit of risk. Nextcom is currently generating about -0.1 per unit of volatility. If you would invest  79,500  in Nextcom on February 21, 2024 and sell it today you would lose (1,280) from holding Nextcom or give up 1.61% of portfolio value over 90 days.

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

Elbit Systems  vs.  Nextcom

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. 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.

Nextcom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextcom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nextcom 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 Nextcom

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

The idea behind Elbit Systems and Nextcom 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.