Correlation Between Elbit Systems and Moog

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

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

Diversification Opportunities for Elbit Systems and Moog

0.74

Correlation Coefficient

Elbit Systems  Moog

Poor diversification

The 3 months correlation between Elbit and Moog is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and Moog Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moog Inc 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 Moog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moog Inc has no effect on the direction of Elbit Systems i.e., Elbit Systems and Moog go up and down completely randomly.

Pair Corralation between Elbit Systems and Moog

Given the investment horizon of 90 days Elbit Systems is expected to generate 2.07 times less return on investment than Moog. But when comparing it to its historical volatility, Elbit Systems is 1.55 times less risky than Moog. It trades about 0.17 of its potential returns per unit of risk. Moog Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  19,349  in Moog Inc on September 2, 2024 and sell it today you would earn a total of  2,778  from holding Moog Inc or generate 14.36% return on investment over 90 days.

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

Elbit Systems  vs.  Moog Inc

Elbit Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Elbit Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Moog Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moog Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Moog sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elbit Systems and Moog

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

The idea behind Elbit Systems and Moog Inc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.