Correlation Between Airbus SE and Essentra Plc

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Can any of the company-specific risk be diversified away by investing in both Airbus SE and Essentra Plc 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 Essentra Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Airbus SE and Essentra plc, you can compare the effects of market volatilities on Airbus SE and Essentra Plc 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 Essentra Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus SE and Essentra Plc.

Diversification Opportunities for Airbus SE and Essentra Plc

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Airbus and Essentra is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Airbus SE and Essentra plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra plc 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 Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra plc has no effect on the direction of Airbus SE i.e., Airbus SE and Essentra Plc go up and down completely randomly.

Pair Corralation between Airbus SE and Essentra Plc

Assuming the 90 days trading horizon Airbus SE is expected to generate 0.95 times more return on investment than Essentra Plc. However, Airbus SE is 1.05 times less risky than Essentra Plc. It trades about 0.16 of its potential returns per unit of risk. Essentra plc is currently generating about -0.23 per unit of risk. If you would invest  3,460  in Airbus SE on October 26, 2024 and sell it today you would earn a total of  620.00  from holding Airbus SE or generate 17.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.33%
ValuesDaily Returns

Airbus SE  vs.  Essentra plc

 Performance 
       Timeline  
Airbus SE 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airbus SE reported solid returns over the last few months and may actually be approaching a breakup point.
Essentra plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Essentra plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Airbus SE and Essentra Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Airbus SE and Essentra Plc

The main advantage of trading using opposite Airbus SE and Essentra Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbus SE position performs unexpectedly, Essentra Plc 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 Essentra Plc will offset losses from the drop in Essentra Plc's long position.
The idea behind Airbus SE and Essentra plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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