Correlation Between Ducommun Incorporated and AAR Corp

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

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

Diversification Opportunities for Ducommun Incorporated and AAR Corp

0.5

Correlation Coefficient

Ducommun Incorporated  AAR Corp

Very weak diversification

The 3 months correlation between Ducommun and AAR is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ducommun Incorporated and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Ducommun Incorporated 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 Ducommun Incorporated are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Ducommun Incorporated i.e., Ducommun Incorporated and AAR Corp go up and down completely randomly.

Pair Corralation between Ducommun Incorporated and AAR Corp

Considering the 90-day investment horizon Ducommun Incorporated is expected to under-perform the AAR Corp. But the stock apears to be less risky and, when comparing its historical volatility, Ducommun Incorporated is 1.11 times less risky than AAR Corp. The stock trades about -0.01 of its potential returns per unit of risk. The AAR Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,112  in AAR Corp on December 28, 2024 and sell it today you would earn a total of  723.00  from holding AAR Corp or generate 11.83% return on investment over 90 days.

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

Ducommun Incorporated  vs.  AAR Corp

Ducommun Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ducommun Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AAR Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward indicators, AAR Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ducommun Incorporated and AAR Corp

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

The idea behind Ducommun Incorporated and AAR Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.