Correlation Between AAR Corp and Ballistic Recovery

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

By analyzing existing cross correlation between AAR Corp and Ballistic Recovery Systems, you can compare the effects of market volatilities on AAR Corp and Ballistic Recovery 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 Ballistic Recovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Ballistic Recovery.

Diversification Opportunities for AAR Corp and Ballistic Recovery

0.31

Correlation Coefficient

AAR Corp  Ballistic Recovery

Weak diversification

The 3 months correlation between AAR and Ballistic is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Ballistic Recovery Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballistic Recovery 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 Ballistic Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballistic Recovery has no effect on the direction of AAR Corp i.e., AAR Corp and Ballistic Recovery go up and down completely randomly.

Pair Corralation between AAR Corp and Ballistic Recovery

Considering the 90-day investment horizon AAR Corp is expected to generate 0.26 times more return on investment than Ballistic Recovery. However, AAR Corp is 3.81 times less risky than Ballistic Recovery. It trades about -0.07 of its potential returns per unit of risk. Ballistic Recovery Systems is currently generating about -0.13 per unit of risk. If you would invest  6,952  in AAR Corp on November 28, 2024 and sell it today you would lose (610.00) from holding AAR Corp or give up 8.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

AAR Corp  vs.  Ballistic Recovery Systems

AAR Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Ballistic Recovery

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AAR Corp and Ballistic Recovery

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

The idea behind AAR Corp and Ballistic Recovery Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.