Correlation Between CPI Aerostructures and SIFCO Industries

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

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

Diversification Opportunities for CPI Aerostructures and SIFCO Industries

0.74

Correlation Coefficient

CPI Aerostructures  SIFCO Industries

Poor diversification

The 3 months correlation between CPI and SIFCO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and SIFCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIFCO Industries 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 SIFCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIFCO Industries has no effect on the direction of CPI Aerostructures i.e., CPI Aerostructures and SIFCO Industries go up and down completely randomly.

Pair Corralation between CPI Aerostructures and SIFCO Industries

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 1.67 times more return on investment than SIFCO Industries. However, CPI Aerostructures is 1.67 times more volatile than SIFCO Industries. It trades about -0.03 of its potential returns per unit of risk. SIFCO Industries is currently generating about -0.12 per unit of risk. If you would invest  391.00  in CPI Aerostructures on December 26, 2024 and sell it today you would lose (45.00) from holding CPI Aerostructures or give up 11.51% of portfolio value over 90 days.

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

CPI Aerostructures  vs.  SIFCO Industries

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.

SIFCO Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CPI Aerostructures and SIFCO Industries

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

The idea behind CPI Aerostructures and SIFCO Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.