Correlation Between Aerojet Rocketdyne and AAR Corp

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

By analyzing existing cross correlation between Aerojet Rocketdyne Holdings and AAR Corp, you can compare the effects of market volatilities on Aerojet Rocketdyne and AAR Corp 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 Aerojet Rocketdyne with a short position of AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerojet Rocketdyne and AAR Corp.

Diversification Opportunities for Aerojet Rocketdyne and AAR Corp

0.22

Correlation Coefficient

Aerojet Rocketdyne  AAR Corp

Modest diversification

The 3 months correlation between Aerojet and AAR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aerojet Rocketdyne Holdings and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Aerojet Rocketdyne 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 Aerojet Rocketdyne Holdings are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Aerojet Rocketdyne i.e., Aerojet Rocketdyne and AAR Corp go up and down completely randomly.

Pair Corralation between Aerojet Rocketdyne and AAR Corp

If you would invest  5,622  in Aerojet Rocketdyne Holdings on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Aerojet Rocketdyne Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Aerojet Rocketdyne Holdings  vs.  AAR Corp

Aerojet Rocketdyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerojet Rocketdyne Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aerojet Rocketdyne is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Aerojet Rocketdyne and AAR Corp

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

The idea behind Aerojet Rocketdyne Holdings and AAR Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.