Correlation Between BWX Technologies and Airbus Group

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

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

Diversification Opportunities for BWX Technologies and Airbus Group

-0.63

Correlation Coefficient

BWX Technologies  Airbus Group

Excellent diversification

The 3 months correlation between BWX and Airbus is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding BWX Technologies and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE and BWX Technologies 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 BWX Technologies are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of BWX Technologies i.e., BWX Technologies and Airbus Group go up and down completely randomly.

Pair Corralation between BWX Technologies and Airbus Group

Given the investment horizon of 90 days BWX Technologies is expected to under-perform the Airbus Group. In addition to that, BWX Technologies is 1.21 times more volatile than Airbus Group SE. It trades about -0.03 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.12 per unit of volatility. If you would invest  16,421  in Airbus Group SE on December 27, 2024 and sell it today you would earn a total of  2,380  from holding Airbus Group SE or generate 14.49% return on investment over 90 days.

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

BWX Technologies  vs.  Airbus Group SE

BWX Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days BWX Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BWX Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Airbus Group SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Airbus Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BWX Technologies and Airbus Group

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

The idea behind BWX Technologies and Airbus Group SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.