Correlation Between Air Industries and CPI Aerostructures

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

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

Diversification Opportunities for Air Industries and CPI Aerostructures

0.69

Correlation Coefficient

Air Industries  CPI Aerostructures

Poor diversification

The 3 months correlation between Air and CPI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Air Industries Group and CPI Aerostructures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Aerostructures and Air Industries 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 Air Industries Group are associated (or correlated) with CPI Aerostructures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Aerostructures has no effect on the direction of Air Industries i.e., Air Industries and CPI Aerostructures go up and down completely randomly.

Pair Corralation between Air Industries and CPI Aerostructures

Given the investment horizon of 90 days Air Industries Group is expected to under-perform the CPI Aerostructures. But the stock apears to be less risky and, when comparing its historical volatility, Air Industries Group is 1.42 times less risky than CPI Aerostructures. The stock trades about -0.08 of its potential returns per unit of risk. The CPI Aerostructures is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  391.00  in CPI Aerostructures on December 26, 2024 and sell it today you would lose (45.00) from holding CPI Aerostructures or give up 11.51% of portfolio value over 90 days.

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

Air Industries Group  vs.  CPI Aerostructures

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.

CPI Aerostructures

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPI Aerostructures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Air Industries and CPI Aerostructures

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

The idea behind Air Industries Group and CPI Aerostructures 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.