Correlation Between AAR Corp and Air Industries

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

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

Diversification Opportunities for AAR Corp and Air Industries

0.24

Correlation Coefficient

AAR Corp  Air Industries

Modest diversification

The 3 months correlation between AAR and Air is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Air Industries Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Industries Group and AAR Corp 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 AAR Corp are associated (or correlated) with Air Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Industries Group has no effect on the direction of AAR Corp i.e., AAR Corp and Air Industries go up and down completely randomly.

Pair Corralation between AAR Corp and Air Industries

Considering the 90-day investment horizon AAR Corp is expected to generate 0.6 times more return on investment than Air Industries. However, AAR Corp is 1.66 times less risky than Air Industries. It trades about 0.13 of its potential returns per unit of risk. Air Industries Group is currently generating about -0.08 per unit of risk. If you would invest  6,105  in AAR Corp on December 26, 2024 and sell it today you would earn a total of  857.00  from holding AAR Corp or generate 14.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

AAR Corp  vs.  Air Industries Group

AAR Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward indicators, AAR Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Air Industries Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Industries Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with AAR Corp and Air Industries

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

The idea behind AAR Corp and Air Industries Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.