Correlation Between Triumph and AAR Corp

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

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

Diversification Opportunities for Triumph and AAR Corp

0.48

Correlation Coefficient

Triumph  AAR Corp

Very weak diversification

The 3 months correlation between Triumph and AAR is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Triumph Group and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Triumph 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 Triumph Group 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 Triumph i.e., Triumph and AAR Corp go up and down completely randomly.

Pair Corralation between Triumph and AAR Corp

Considering the 90-day investment horizon Triumph Group is expected to generate 1.21 times more return on investment than AAR Corp. However, Triumph is 1.21 times more volatile than AAR Corp. It trades about -0.03 of its potential returns per unit of risk. AAR Corp is currently generating about -0.15 per unit of risk. If you would invest  1,891  in Triumph Group on October 8, 2024 and sell it today you would lose (34.00) from holding Triumph Group or give up 1.8% of portfolio value over 90 days.

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

Triumph Group  vs.  AAR Corp

Triumph Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Triumph Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Triumph demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Triumph and AAR Corp

The main advantage of trading using opposite Triumph and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triumph 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 Triumph Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.