Correlation Between Conrad Industries and BAE Systems

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

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

Diversification Opportunities for Conrad Industries and BAE Systems

0.63

Correlation Coefficient

Conrad Industries  BAE Systems

Poor diversification

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

Pair Corralation between Conrad Industries and BAE Systems

If you would invest  1,030  in Conrad Industries on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Conrad Industries or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.79%
Values	Daily Returns

Conrad Industries  vs.  BAE Systems PLC

Conrad Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conrad Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Conrad Industries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Conrad Industries and BAE Systems

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

The idea behind Conrad Industries and BAE Systems PLC 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.