Correlation Between Airbus Group and Thales SA

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

By analyzing existing cross correlation between Airbus Group NV and Thales SA ADR, you can compare the effects of market volatilities on Airbus Group 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 Airbus Group with a short position of Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and Thales SA.

Diversification Opportunities for Airbus Group and Thales SA

-0.61

Correlation Coefficient

Airbus Group  Thales SA

Excellent diversification

The 3 months correlation between Airbus and Thales is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Airbus Group NV 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 Airbus Group 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 Airbus Group NV 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 Airbus Group i.e., Airbus Group and Thales SA go up and down completely randomly.

Pair Corralation between Airbus Group and Thales SA

Assuming the 90 days horizon Airbus Group is expected to generate 2.08 times less return on investment than Thales SA. But when comparing it to its historical volatility, Airbus Group NV is 1.02 times less risky than Thales SA. It trades about 0.15 of its potential returns per unit of risk. Thales SA ADR is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  2,857  in Thales SA ADR on October 23, 2024 and sell it today you would earn a total of  191.00  from holding Thales SA ADR or generate 6.69% return on investment over 90 days.

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

Airbus Group NV  vs.  Thales SA ADR

Airbus Group NV

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Airbus Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Airbus Group and Thales SA

The main advantage of trading using opposite Airbus Group and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbus Group 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 Airbus Group NV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.