Correlation Between Vertical Aerospace and Elbit Systems

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

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

Diversification Opportunities for Vertical Aerospace and Elbit Systems

-0.49

Correlation Coefficient

Vertical Aerospace  Elbit Systems

Very good diversification

The 3 months correlation between Vertical and Elbit is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems and Vertical Aerospace 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 Vertical Aerospace 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 Vertical Aerospace i.e., Vertical Aerospace and Elbit Systems go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Elbit Systems

Given the investment horizon of 90 days Vertical Aerospace is expected to under-perform the Elbit Systems. In addition to that, Vertical Aerospace is 5.66 times more volatile than Elbit Systems. It trades about -0.06 of its total potential returns per unit of risk. Elbit Systems is currently generating about 0.19 per unit of volatility. If you would invest  19,770  in Elbit Systems on July 12, 2024 and sell it today you would earn a total of  1,037  from holding Elbit Systems or generate 5.25% return on investment over 90 days.

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

Vertical Aerospace  vs.  Elbit Systems

Vertical Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertical Aerospace 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 quite persistent which may send shares a bit higher in November 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Elbit Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Elbit Systems may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Vertical Aerospace and Elbit Systems

The main advantage of trading using opposite Vertical Aerospace and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertical Aerospace 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 Vertical Aerospace 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 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.