Correlation Between BAE Systems and Nauticus Robotics

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

Diversification Opportunities for BAE Systems and Nauticus Robotics

-0.19

Correlation Coefficient

BAE Systems  Nauticus Robotics

Good diversification

The 3 months correlation between BAE and Nauticus is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems PLC and Nauticus Robotics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nauticus Robotics 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 Nauticus Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nauticus Robotics has no effect on the direction of BAE Systems i.e., BAE Systems and Nauticus Robotics go up and down completely randomly.

Pair Corralation between BAE Systems and Nauticus Robotics

Assuming the 90 days horizon BAE Systems PLC is expected to under-perform the Nauticus Robotics. But the pink sheet apears to be less risky and, when comparing its historical volatility, BAE Systems PLC is 29.45 times less risky than Nauticus Robotics. The pink sheet trades about -0.28 of its potential returns per unit of risk. The Nauticus Robotics is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Nauticus Robotics on October 8, 2024 and sell it today you would earn a total of  272.00  from holding Nauticus Robotics or generate 251.85% return on investment over 90 days.

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

BAE Systems PLC  vs.  Nauticus Robotics

BAE Systems PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAE Systems PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nauticus Robotics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nauticus Robotics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nauticus Robotics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BAE Systems and Nauticus Robotics

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

The idea behind BAE Systems PLC and Nauticus Robotics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.