Correlation Between Thales SA and Airbus Group

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

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

Diversification Opportunities for Thales SA and Airbus Group

0.3

Correlation Coefficient

Thales SA  Airbus Group

Weak diversification

The 3 months correlation between Thales and Airbus is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE and Thales SA 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 Thales SA are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Thales SA i.e., Thales SA and Airbus Group go up and down completely randomly.

Pair Corralation between Thales SA and Airbus Group

Assuming the 90 days horizon Thales SA is expected to under-perform the Airbus Group. In addition to that, Thales SA is 1.06 times more volatile than Airbus Group SE. It trades about -0.01 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.16 per unit of volatility. If you would invest  13,174  in Airbus Group SE on September 5, 2024 and sell it today you would earn a total of  2,034  from holding Airbus Group SE or generate 15.44% return on investment over 90 days.

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

Thales SA  vs.  Airbus Group SE

Thales SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Thales SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Airbus Group SE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Airbus Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thales SA and Airbus Group

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

The idea behind Thales SA and Airbus Group SE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.