Correlation Between AAR Corp and Moog

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

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

Diversification Opportunities for AAR Corp and Moog

0.46

Correlation Coefficient

AAR Corp  Moog

Very weak diversification

The 3 months correlation between AAR and Moog is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Moog Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moog Inc 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 Moog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moog Inc has no effect on the direction of AAR Corp i.e., AAR Corp and Moog go up and down completely randomly.

Pair Corralation between AAR Corp and Moog

Considering the 90-day investment horizon AAR Corp is expected to under-perform the Moog. In addition to that, AAR Corp is 2.43 times more volatile than Moog Inc. It trades about -0.13 of its total potential returns per unit of risk. Moog Inc is currently generating about -0.12 per unit of volatility. If you would invest  21,534  in Moog Inc on September 19, 2024 and sell it today you would lose (460.00) from holding Moog Inc or give up 2.14% of portfolio value over 90 days.

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

AAR Corp  vs.  Moog Inc

AAR Corp

Risk-Adjusted Performance

0 of 100

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 weak 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.

Moog Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moog Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Moog sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAR Corp and Moog

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

The idea behind AAR Corp and Moog Inc 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.