Correlation Between Eltek and Bel Fuse

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

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

Diversification Opportunities for Eltek and Bel Fuse

0.01

Correlation Coefficient

Eltek  Bel Fuse

Significant diversification

The 3 months correlation between Eltek and Bel is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Bel Fuse A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bel Fuse A and Eltek 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 Eltek are associated (or correlated) with Bel Fuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bel Fuse A has no effect on the direction of Eltek i.e., Eltek and Bel Fuse go up and down completely randomly.

Pair Corralation between Eltek and Bel Fuse

Given the investment horizon of 90 days Eltek is expected to generate 16.93 times less return on investment than Bel Fuse. But when comparing it to its historical volatility, Eltek is 1.33 times less risky than Bel Fuse. It trades about 0.01 of its potential returns per unit of risk. Bel Fuse A is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,965  in Bel Fuse A on August 14, 2024 and sell it today you would earn a total of  912.00  from holding Bel Fuse A or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Eltek  vs.  Bel Fuse A

Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eltek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Eltek is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Bel Fuse A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Bel Fuse sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eltek and Bel Fuse

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

The idea behind Eltek and Bel Fuse A 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.