Correlation Between Nextcom and Elbit Med

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

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

Diversification Opportunities for Nextcom and Elbit Med

-0.38

Correlation Coefficient

Nextcom  Elbit Med

Very good diversification

The 3 months correlation between Nextcom and Elbit is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nextcom and Elbit Med Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Med Tech and Nextcom 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 Nextcom are associated (or correlated) with Elbit Med. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Med Tech has no effect on the direction of Nextcom i.e., Nextcom and Elbit Med go up and down completely randomly.

Pair Corralation between Nextcom and Elbit Med

Assuming the 90 days trading horizon Nextcom is expected to generate 0.36 times more return on investment than Elbit Med. However, Nextcom is 2.76 times less risky than Elbit Med. It trades about 0.07 of its potential returns per unit of risk. Elbit Med Tech is currently generating about -0.02 per unit of risk. If you would invest  52,480  in Nextcom on January 31, 2024 and sell it today you would earn a total of  27,020  from holding Nextcom or generate 51.49% return on investment over 90 days.

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

Nextcom  vs.  Elbit Med Tech

Nextcom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextcom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nextcom may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Elbit Med Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elbit Med Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nextcom and Elbit Med

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

The idea behind Nextcom and Elbit Med Tech 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.