Correlation Between EN Shoham and Gilat Satellite

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

By analyzing existing cross correlation between EN Shoham Business and Gilat Satellite Networks, you can compare the effects of market volatilities on EN Shoham and Gilat Satellite 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 EN Shoham with a short position of Gilat Satellite. Check out your portfolio center. Please also check ongoing floating volatility patterns of EN Shoham and Gilat Satellite.

Diversification Opportunities for EN Shoham and Gilat Satellite

0.22

Correlation Coefficient

EN Shoham  Gilat Satellite

Modest diversification

The 3 months correlation between SHOM and Gilat is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding EN Shoham Business and Gilat Satellite Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Satellite Networks and EN Shoham 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 EN Shoham Business are associated (or correlated) with Gilat Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Satellite Networks has no effect on the direction of EN Shoham i.e., EN Shoham and Gilat Satellite go up and down completely randomly.

Pair Corralation between EN Shoham and Gilat Satellite

Assuming the 90 days trading horizon EN Shoham Business is expected to under-perform the Gilat Satellite. But the stock apears to be less risky and, when comparing its historical volatility, EN Shoham Business is 1.1 times less risky than Gilat Satellite. The stock trades about -0.15 of its potential returns per unit of risk. The Gilat Satellite Networks is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  208,600  in Gilat Satellite Networks on February 2, 2024 and sell it today you would lose (21,200) from holding Gilat Satellite Networks or give up 10.16% of portfolio value over 90 days.

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

EN Shoham Business  vs.  Gilat Satellite Networks

EN Shoham Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EN Shoham Business has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gilat Satellite Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gilat Satellite Networks 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.

Pair Trading with EN Shoham and Gilat Satellite

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

The idea behind EN Shoham Business and Gilat Satellite Networks 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.