Correlation Between Dupont De and AeroVironment

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

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

Diversification Opportunities for Dupont De and AeroVironment

0.67

Correlation Coefficient

Dupont De  AeroVironment

Poor diversification

The 3 months correlation between Dupont and AeroVironment is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and Dupont De 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 Dupont De Nemours are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Dupont De i.e., Dupont De and AeroVironment go up and down completely randomly.

Pair Corralation between Dupont De and AeroVironment

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 0.29 times more return on investment than AeroVironment. However, Dupont De Nemours is 3.41 times less risky than AeroVironment. It trades about -0.15 of its potential returns per unit of risk. AeroVironment is currently generating about -0.05 per unit of risk. If you would invest  8,410  in Dupont De Nemours on October 8, 2024 and sell it today you would lose (935.00) from holding Dupont De Nemours or give up 11.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Dupont De Nemours  vs.  AeroVironment

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

AeroVironment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dupont De and AeroVironment

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

The idea behind Dupont De Nemours and AeroVironment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.