Correlation Between BAE Systems and Sealed Air
Can any of the company-specific risk be diversified away by investing in both BAE Systems and Sealed Air 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 BAE Systems and Sealed Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BAE Systems plc and Sealed Air Corp, you can compare the effects of market volatilities on BAE Systems and Sealed Air 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 BAE Systems with a short position of Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and Sealed Air.
Diversification Opportunities for BAE Systems and Sealed Air
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BAE and Sealed is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems plc and Sealed Air Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air Corp and BAE Systems 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 BAE Systems plc are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air Corp has no effect on the direction of BAE Systems i.e., BAE Systems and Sealed Air go up and down completely randomly.
Pair Corralation between BAE Systems and Sealed Air
Assuming the 90 days trading horizon BAE Systems plc is expected to generate 1.41 times more return on investment than Sealed Air. However, BAE Systems is 1.41 times more volatile than Sealed Air Corp. It trades about 0.19 of its potential returns per unit of risk. Sealed Air Corp is currently generating about -0.09 per unit of risk. If you would invest 114,500 in BAE Systems plc on December 28, 2024 and sell it today you would earn a total of 41,950 from holding BAE Systems plc or generate 36.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 90.63% |
Values | Daily Returns |
BAE Systems plc vs. Sealed Air Corp
Performance |
Timeline |
BAE Systems plc |
Sealed Air Corp |
BAE Systems and Sealed Air Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BAE Systems and Sealed Air
The main advantage of trading using opposite BAE Systems and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems position performs unexpectedly, Sealed Air 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 Sealed Air will offset losses from the drop in Sealed Air's long position.BAE Systems vs. Raytheon Technologies Corp | BAE Systems vs. Sartorius Stedim Biotech | BAE Systems vs. JD Sports Fashion | BAE Systems vs. JB Hunt Transport |
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Check out your portfolio center.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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