Correlation Between Airbus SE and Hexcel

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

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

Diversification Opportunities for Airbus SE and Hexcel

0.82

Correlation Coefficient

Airbus SE  Hexcel

Very poor diversification

The 3 months correlation between Airbus and Hexcel is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Airbus SE and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel and Airbus SE 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 Airbus SE are associated (or correlated) with Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of Airbus SE i.e., Airbus SE and Hexcel go up and down completely randomly.

Pair Corralation between Airbus SE and Hexcel

Assuming the 90 days trading horizon Airbus SE is expected to generate 0.89 times more return on investment than Hexcel. However, Airbus SE is 1.12 times less risky than Hexcel. It trades about 0.2 of its potential returns per unit of risk. Hexcel is currently generating about 0.11 per unit of risk. If you would invest  13,056  in Airbus SE on September 13, 2024 and sell it today you would earn a total of  2,574  from holding Airbus SE or generate 19.72% return on investment over 90 days.

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

Airbus SE  vs.  Hexcel

Airbus SE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Airbus SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hexcel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hexcel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Airbus SE and Hexcel

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

The idea behind Airbus SE and Hexcel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.