Correlation Between SIFCO Industries and CPI Aerostructures

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

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

Diversification Opportunities for SIFCO Industries and CPI Aerostructures

0.74

Correlation Coefficient

SIFCO Industries  CPI Aerostructures

Poor diversification

The 3 months correlation between SIFCO and CPI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SIFCO Industries and CPI Aerostructures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Aerostructures and SIFCO Industries 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 SIFCO Industries are associated (or correlated) with CPI Aerostructures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Aerostructures has no effect on the direction of SIFCO Industries i.e., SIFCO Industries and CPI Aerostructures go up and down completely randomly.

Pair Corralation between SIFCO Industries and CPI Aerostructures

Considering the 90-day investment horizon SIFCO Industries is expected to under-perform the CPI Aerostructures. But the stock apears to be less risky and, when comparing its historical volatility, SIFCO Industries is 1.67 times less risky than CPI Aerostructures. The stock trades about -0.12 of its potential returns per unit of risk. The CPI Aerostructures is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  391.00  in CPI Aerostructures on December 26, 2024 and sell it today you would lose (45.00) from holding CPI Aerostructures or give up 11.51% of portfolio value over 90 days.

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

SIFCO Industries  vs.  CPI Aerostructures

SIFCO Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIFCO Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CPI Aerostructures

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPI Aerostructures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SIFCO Industries and CPI Aerostructures

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

The idea behind SIFCO Industries and CPI Aerostructures 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.