Correlation Between Aerospace Industrial and Giant Manufacturing

Can any of the company-specific risk be diversified away by investing in both Aerospace Industrial and Giant Manufacturing 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 Giant Manufacturing 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 Giant Manufacturing Co, you can compare the effects of market volatilities on Aerospace Industrial and Giant Manufacturing 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 Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerospace Industrial and Giant Manufacturing.

Diversification Opportunities for Aerospace Industrial and Giant Manufacturing

0.1

Correlation Coefficient

Aerospace Industrial  Giant Manufacturing

Average diversification

The 3 months correlation between Aerospace and Giant is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aerospace Industrial Developme and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Aerospace Industrial i.e., Aerospace Industrial and Giant Manufacturing go up and down completely randomly.

Pair Corralation between Aerospace Industrial and Giant Manufacturing

Assuming the 90 days trading horizon Aerospace Industrial Development is expected to generate 0.96 times more return on investment than Giant Manufacturing. However, Aerospace Industrial Development is 1.04 times less risky than Giant Manufacturing. It trades about 0.14 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about 0.02 per unit of risk. If you would invest  4,520  in Aerospace Industrial Development on December 29, 2024 and sell it today you would earn a total of  760.00  from holding Aerospace Industrial Development or generate 16.81% return on investment over 90 days.

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

Aerospace Industrial Developme  vs.  Giant Manufacturing Co

Aerospace Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerospace Industrial Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aerospace Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Giant Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Giant Manufacturing 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 Aerospace Industrial and Giant Manufacturing

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

The idea behind Aerospace Industrial Development and Giant Manufacturing Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.