Correlation Between Aerojet Rocketdyne and Ducommun Incorporated

Can any of the company-specific risk be diversified away by investing in both Aerojet Rocketdyne and Ducommun Incorporated 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 Ducommun Incorporated 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 Ducommun Incorporated, you can compare the effects of market volatilities on Aerojet Rocketdyne and Ducommun Incorporated 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 Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerojet Rocketdyne and Ducommun Incorporated.

Diversification Opportunities for Aerojet Rocketdyne and Ducommun Incorporated

0.0

Correlation Coefficient

Aerojet Rocketdyne  Ducommun Incorporated

Pay attention - limited upside

The 3 months correlation between Aerojet and Ducommun is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aerojet Rocketdyne Holdings and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated 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 Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of Aerojet Rocketdyne i.e., Aerojet Rocketdyne and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between Aerojet Rocketdyne and Ducommun Incorporated

If you would invest (100.00) in Aerojet Rocketdyne Holdings on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Aerojet Rocketdyne Holdings or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Aerojet Rocketdyne Holdings  vs.  Ducommun Incorporated

Aerojet Rocketdyne

Risk-Adjusted Performance

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.

Ducommun Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ducommun Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aerojet Rocketdyne and Ducommun Incorporated

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

The idea behind Aerojet Rocketdyne Holdings and Ducommun Incorporated 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.