Correlation Between CPI Aerostructures and Thales SA

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

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

Diversification Opportunities for CPI Aerostructures and Thales SA

-0.83

Correlation Coefficient

CPI Aerostructures  Thales SA

Pay attention - limited upside

The 3 months correlation between CPI and Thales is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of CPI Aerostructures i.e., CPI Aerostructures and Thales SA go up and down completely randomly.

Pair Corralation between CPI Aerostructures and Thales SA

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 3.03 times more return on investment than Thales SA. However, CPI Aerostructures is 3.03 times more volatile than Thales SA ADR. It trades about 0.35 of its potential returns per unit of risk. Thales SA ADR is currently generating about -0.24 per unit of risk. If you would invest  363.00  in CPI Aerostructures on October 8, 2024 and sell it today you would earn a total of  68.00  from holding CPI Aerostructures or generate 18.73% return on investment over 90 days.

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

CPI Aerostructures  vs.  Thales SA ADR

CPI Aerostructures

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Aerostructures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CPI Aerostructures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Thales SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CPI Aerostructures and Thales SA

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

The idea behind CPI Aerostructures and Thales SA ADR 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.