Correlation Between CPI Aerostructures and Hexcel

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

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

Diversification Opportunities for CPI Aerostructures and Hexcel

0.87

Correlation Coefficient

CPI Aerostructures  Hexcel

Very poor diversification

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

Pair Corralation between CPI Aerostructures and Hexcel

Considering the 90-day investment horizon CPI Aerostructures is expected to under-perform the Hexcel. In addition to that, CPI Aerostructures is 2.37 times more volatile than Hexcel. It trades about -0.03 of its total potential returns per unit of risk. Hexcel is currently generating about -0.05 per unit of volatility. If you would invest  6,293  in Hexcel on December 27, 2024 and sell it today you would lose (381.00) from holding Hexcel or give up 6.05% of portfolio value over 90 days.

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

CPI Aerostructures  vs.  Hexcel

CPI Aerostructures

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPI Aerostructures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hexcel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hexcel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hexcel is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CPI Aerostructures and Hexcel

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

The idea behind CPI Aerostructures and Hexcel 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.