Correlation Between Airbus SE and AeroVironment

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

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

Diversification Opportunities for Airbus SE and AeroVironment

-0.39

Correlation Coefficient

Airbus SE  AeroVironment

Very good diversification

The 3 months correlation between Airbus and AeroVironment is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Airbus SE and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Airbus SE i.e., Airbus SE and AeroVironment go up and down completely randomly.

Pair Corralation between Airbus SE and AeroVironment

Assuming the 90 days trading horizon Airbus SE is expected to generate 0.37 times more return on investment than AeroVironment. However, Airbus SE is 2.71 times less risky than AeroVironment. It trades about 0.18 of its potential returns per unit of risk. AeroVironment is currently generating about -0.11 per unit of risk. If you would invest  3,500  in Airbus SE on October 6, 2024 and sell it today you would earn a total of  440.00  from holding Airbus SE or generate 12.57% return on investment over 90 days.

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

Airbus SE  vs.  AeroVironment

Airbus SE

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Airbus SE reported solid returns over the last few months and may actually be approaching a breakup point.

AeroVironment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AeroVironment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Pair Trading with Airbus SE and AeroVironment

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

The idea behind Airbus SE and AeroVironment 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.