Correlation Between Value Capital and Elbit Systems

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

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

Diversification Opportunities for Value Capital and Elbit Systems

0.19

Correlation Coefficient

Value Capital  Elbit Systems

Average diversification

The 3 months correlation between Value and Elbit is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Value Capital One and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Value Capital 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 Value Capital One 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 Value Capital i.e., Value Capital and Elbit Systems go up and down completely randomly.

Pair Corralation between Value Capital and Elbit Systems

Assuming the 90 days trading horizon Value Capital One is expected to under-perform the Elbit Systems. In addition to that, Value Capital is 1.96 times more volatile than Elbit Systems. It trades about -0.09 of its total potential returns per unit of risk. Elbit Systems is currently generating about -0.11 per unit of volatility. If you would invest  7,632,051  in Elbit Systems on February 5, 2024 and sell it today you would lose (198,051) from holding Elbit Systems or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.86%
Values	Daily Returns

Value Capital One  vs.  Elbit Systems

Value Capital One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Capital One 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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Value Capital and Elbit Systems

The main advantage of trading using opposite Value Capital and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Capital 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 Value Capital One 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.