Correlation Between Astronics and VSE

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

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

Diversification Opportunities for Astronics and VSE

0.87

Correlation Coefficient

Astronics  VSE

Very poor diversification

The 3 months correlation between Astronics and VSE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Astronics and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Astronics 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 Astronics are associated (or correlated) with VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Astronics i.e., Astronics and VSE go up and down completely randomly.

Pair Corralation between Astronics and VSE

Given the investment horizon of 90 days Astronics is expected to generate 1.11 times more return on investment than VSE. However, Astronics is 1.11 times more volatile than VSE Corporation. It trades about 0.25 of its potential returns per unit of risk. VSE Corporation is currently generating about 0.14 per unit of risk. If you would invest  1,580  in Astronics on December 28, 2024 and sell it today you would earn a total of  1,021  from holding Astronics or generate 64.62% return on investment over 90 days.

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

Astronics  vs.  VSE Corp.

Astronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Astronics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Astronics displayed solid returns over the last few months and may actually be approaching a breakup point.

VSE Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astronics and VSE

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

The idea behind Astronics and VSE Corporation 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.