Correlation Between Lilium NV and Howmet Aerospace

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

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

Diversification Opportunities for Lilium NV and Howmet Aerospace

-0.58

Correlation Coefficient

Lilium NV  Howmet Aerospace

Excellent diversification

The 3 months correlation between Lilium and Howmet is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace and Lilium NV 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 Lilium NV are associated (or correlated) with Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of Lilium NV i.e., Lilium NV and Howmet Aerospace go up and down completely randomly.

Pair Corralation between Lilium NV and Howmet Aerospace

Given the investment horizon of 90 days Lilium NV is expected to under-perform the Howmet Aerospace. In addition to that, Lilium NV is 7.02 times more volatile than Howmet Aerospace. It trades about -0.04 of its total potential returns per unit of risk. Howmet Aerospace is currently generating about 0.13 per unit of volatility. If you would invest  11,019  in Howmet Aerospace on December 28, 2024 and sell it today you would earn a total of  1,950  from holding Howmet Aerospace or generate 17.7% return on investment over 90 days.

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

Lilium NV  vs.  Howmet Aerospace

Lilium NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lilium NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Howmet Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Howmet Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lilium NV and Howmet Aerospace

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

The idea behind Lilium NV and Howmet Aerospace 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.