Correlation Between Northrop Grumman and Safe Pro

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

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

Diversification Opportunities for Northrop Grumman and Safe Pro

-0.75

Correlation Coefficient

Northrop Grumman  Safe Pro

Pay attention - limited upside

The 3 months correlation between Northrop and Safe is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Safe Pro Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe Pro Group and Northrop Grumman 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 Northrop Grumman are associated (or correlated) with Safe Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe Pro Group has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Safe Pro go up and down completely randomly.

Pair Corralation between Northrop Grumman and Safe Pro

Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.14 times more return on investment than Safe Pro. However, Northrop Grumman is 7.15 times less risky than Safe Pro. It trades about 0.14 of its potential returns per unit of risk. Safe Pro Group is currently generating about 0.01 per unit of risk. If you would invest  46,720  in Northrop Grumman on October 22, 2024 and sell it today you would earn a total of  1,518  from holding Northrop Grumman or generate 3.25% return on investment over 90 days.

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

Northrop Grumman  vs.  Safe Pro Group

Northrop Grumman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northrop Grumman has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Safe Pro Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safe Pro Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Safe Pro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northrop Grumman and Safe Pro

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

The idea behind Northrop Grumman and Safe Pro Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.