Correlation Between Moog and AAR Corp

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

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

Diversification Opportunities for Moog and AAR Corp

0.55

Correlation Coefficient

Moog  AAR Corp

Very weak diversification

The 3 months correlation between Moog and AAR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Moog Inc and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Moog 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 Moog Inc 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 Moog i.e., Moog and AAR Corp go up and down completely randomly.

Pair Corralation between Moog and AAR Corp

Assuming the 90 days horizon Moog Inc is expected to generate 0.42 times more return on investment than AAR Corp. However, Moog Inc is 2.39 times less risky than AAR Corp. It trades about -0.12 of its potential returns per unit of risk. AAR Corp is currently generating about -0.16 per unit of risk. If you would invest  21,534  in Moog Inc on September 20, 2024 and sell it today you would lose (460.00) from holding Moog Inc or give up 2.14% of portfolio value over 90 days.

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

Moog Inc  vs.  AAR Corp

Moog Inc

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moog Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Moog is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AAR Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Moog and AAR Corp

The main advantage of trading using opposite Moog and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moog 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 Moog Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.