Correlation Between Aerospace Industrial and Sunspring Metal

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

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

Diversification Opportunities for Aerospace Industrial and Sunspring Metal

0.38

Correlation Coefficient

Aerospace Industrial  Sunspring Metal

Weak diversification

The 3 months correlation between Aerospace and Sunspring is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aerospace Industrial Developme and Sunspring Metal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunspring Metal Corp and Aerospace Industrial 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 Aerospace Industrial Development are associated (or correlated) with Sunspring Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunspring Metal Corp has no effect on the direction of Aerospace Industrial i.e., Aerospace Industrial and Sunspring Metal go up and down completely randomly.

Pair Corralation between Aerospace Industrial and Sunspring Metal

Assuming the 90 days trading horizon Aerospace Industrial Development is expected to generate 0.35 times more return on investment than Sunspring Metal. However, Aerospace Industrial Development is 2.9 times less risky than Sunspring Metal. It trades about 0.01 of its potential returns per unit of risk. Sunspring Metal Corp is currently generating about -0.08 per unit of risk. If you would invest  4,370  in Aerospace Industrial Development on October 11, 2024 and sell it today you would earn a total of  10.00  from holding Aerospace Industrial Development or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Aerospace Industrial Developme  vs.  Sunspring Metal Corp

Aerospace Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sunspring Metal Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunspring Metal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Aerospace Industrial and Sunspring Metal

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

The idea behind Aerospace Industrial Development and Sunspring Metal Corp 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.