Correlation Between CPI Aerostructures and Innovative Solutions

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

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

Diversification Opportunities for CPI Aerostructures and Innovative Solutions

0.88

Correlation Coefficient

CPI Aerostructures  Innovative Solutions

Very poor diversification

The 3 months correlation between CPI and Innovative is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and 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 Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of CPI Aerostructures i.e., CPI Aerostructures and Innovative Solutions go up and down completely randomly.

Pair Corralation between CPI Aerostructures and Innovative Solutions

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 1.03 times more return on investment than Innovative Solutions. However, CPI Aerostructures is 1.03 times more volatile than Innovative Solutions and. It trades about -0.05 of its potential returns per unit of risk. Innovative Solutions and is currently generating about -0.08 per unit of risk. If you would invest  407.00  in CPI Aerostructures on December 29, 2024 and sell it today you would lose (70.00) from holding CPI Aerostructures or give up 17.2% 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.  Innovative Solutions and

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Innovative Solutions and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovative Solutions and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CPI Aerostructures and Innovative Solutions

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

The idea behind CPI Aerostructures and Innovative Solutions and 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.