Correlation Between AeroVironment and WGHT WTCHER

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

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

Diversification Opportunities for AeroVironment and WGHT WTCHER

-0.52

Correlation Coefficient

AeroVironment  WGHT WTCHER

Excellent diversification

The 3 months correlation between AeroVironment and WGHT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and WGHT WTCHER INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGHT WTCHER INTL and AeroVironment 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 AeroVironment are associated (or correlated) with WGHT WTCHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGHT WTCHER INTL has no effect on the direction of AeroVironment i.e., AeroVironment and WGHT WTCHER go up and down completely randomly.

Pair Corralation between AeroVironment and WGHT WTCHER

Assuming the 90 days horizon AeroVironment is expected to under-perform the WGHT WTCHER. But the stock apears to be less risky and, when comparing its historical volatility, AeroVironment is 2.0 times less risky than WGHT WTCHER. The stock trades about -0.06 of its potential returns per unit of risk. The WGHT WTCHER INTL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  141.00  in WGHT WTCHER INTL on October 10, 2024 and sell it today you would earn a total of  30.00  from holding WGHT WTCHER INTL or generate 21.28% return on investment over 90 days.

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

AeroVironment  vs.  WGHT WTCHER INTL

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.

WGHT WTCHER INTL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WGHT WTCHER INTL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, WGHT WTCHER unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AeroVironment and WGHT WTCHER

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

The idea behind AeroVironment and WGHT WTCHER INTL 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.