Correlation Between Elbit Systems and Nova

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

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

Diversification Opportunities for Elbit Systems and Nova

-0.25

Correlation Coefficient

Elbit Systems  Nova

Very good diversification

The 3 months correlation between Elbit and Nova is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova 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 Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of Elbit Systems i.e., Elbit Systems and Nova go up and down completely randomly.

Pair Corralation between Elbit Systems and Nova

Assuming the 90 days trading horizon Elbit Systems is expected to generate 1.13 times more return on investment than Nova. However, Elbit Systems is 1.13 times more volatile than Nova. It trades about -0.05 of its potential returns per unit of risk. Nova is currently generating about -0.1 per unit of risk. If you would invest  7,710,000  in Elbit Systems on February 1, 2024 and sell it today you would lose (103,000) from holding Elbit Systems or give up 1.34% of portfolio value over 90 days.

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

Elbit Systems  vs.  Nova

Elbit Systems

Risk-Adjusted Performance

0 of 100

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.

Nova

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nova sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elbit Systems and Nova

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

The idea behind Elbit Systems and Nova 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.