Correlation Between Gaztransport Technigaz and AeroVironment

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

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

Diversification Opportunities for Gaztransport Technigaz and AeroVironment

-0.18

Correlation Coefficient

Gaztransport Technigaz  AeroVironment

Good diversification

The 3 months correlation between Gaztransport and AeroVironment is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SA and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and Gaztransport Technigaz 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 Gaztransport Technigaz SA are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Gaztransport Technigaz i.e., Gaztransport Technigaz and AeroVironment go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and AeroVironment

Assuming the 90 days horizon Gaztransport Technigaz is expected to generate 1.1 times less return on investment than AeroVironment. In addition to that, Gaztransport Technigaz is 1.06 times more volatile than AeroVironment. It trades about 0.38 of its total potential returns per unit of risk. AeroVironment is currently generating about 0.44 per unit of volatility. If you would invest  15,000  in AeroVironment on October 27, 2024 and sell it today you would earn a total of  2,495  from holding AeroVironment or generate 16.63% return on investment over 90 days.

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

Gaztransport Technigaz SA  vs.  AeroVironment

Gaztransport Technigaz

Risk-Adjusted Performance

10 of 100

OK

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

AeroVironment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AeroVironment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gaztransport Technigaz and AeroVironment

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

The idea behind Gaztransport Technigaz SA and AeroVironment 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.