Correlation Between Eva Airways and National Aerospace

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

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

Diversification Opportunities for Eva Airways and National Aerospace

0.05

Correlation Coefficient

Eva Airways  National Aerospace

Significant diversification

The 3 months correlation between Eva and National is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Eva Airways Corp and National Aerospace Fasteners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Aerospace and Eva Airways 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 Eva Airways Corp are associated (or correlated) with National Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Aerospace has no effect on the direction of Eva Airways i.e., Eva Airways and National Aerospace go up and down completely randomly.

Pair Corralation between Eva Airways and National Aerospace

Assuming the 90 days trading horizon Eva Airways Corp is expected to generate 1.58 times more return on investment than National Aerospace. However, Eva Airways is 1.58 times more volatile than National Aerospace Fasteners. It trades about 0.16 of its potential returns per unit of risk. National Aerospace Fasteners is currently generating about 0.03 per unit of risk. If you would invest  4,150  in Eva Airways Corp on September 23, 2024 and sell it today you would earn a total of  310.00  from holding Eva Airways Corp or generate 7.47% return on investment over 90 days.

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

Eva Airways Corp  vs.  National Aerospace Fasteners

Eva Airways Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eva Airways Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eva Airways showed solid returns over the last few months and may actually be approaching a breakup point.

National Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Aerospace Fasteners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, National Aerospace is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eva Airways and National Aerospace

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

The idea behind Eva Airways Corp and National Aerospace Fasteners 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.