Correlation Between Huntington Ingalls and AAR Corp

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

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

Diversification Opportunities for Huntington Ingalls and AAR Corp

0.41

Correlation Coefficient

Huntington Ingalls  AAR Corp

Very weak diversification

The 3 months correlation between Huntington and AAR is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Ingalls Industries and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Huntington Ingalls 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 Huntington Ingalls Industries 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 Huntington Ingalls i.e., Huntington Ingalls and AAR Corp go up and down completely randomly.

Pair Corralation between Huntington Ingalls and AAR Corp

Considering the 90-day investment horizon Huntington Ingalls Industries is expected to generate 1.24 times more return on investment than AAR Corp. However, Huntington Ingalls is 1.24 times more volatile than AAR Corp. It trades about 0.06 of its potential returns per unit of risk. AAR Corp is currently generating about -0.03 per unit of risk. If you would invest  18,695  in Huntington Ingalls Industries on December 28, 2024 and sell it today you would earn a total of  1,837  from holding Huntington Ingalls Industries or generate 9.83% return on investment over 90 days.

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

Huntington Ingalls Industries  vs.  AAR Corp

Huntington Ingalls

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huntington Ingalls Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Huntington Ingalls demonstrated solid returns over the last few months and may actually be approaching a breakup point.

AAR Corp

Risk-Adjusted Performance

OK

Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Huntington Ingalls and AAR Corp

The main advantage of trading using opposite Huntington Ingalls and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntington Ingalls 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 Huntington Ingalls Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.