Correlation Between V2X and Ducommun Incorporated

Can any of the company-specific risk be diversified away by investing in both V2X and Ducommun Incorporated 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 V2X and Ducommun Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between V2X Inc and Ducommun Incorporated, you can compare the effects of market volatilities on V2X and Ducommun Incorporated 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 V2X with a short position of Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and Ducommun Incorporated.

Diversification Opportunities for V2X and Ducommun Incorporated

0.56

Correlation Coefficient

V2X  Ducommun Incorporated

Very weak diversification

The 3 months correlation between V2X and Ducommun is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and V2X 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 V2X Inc are associated (or correlated) with Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of V2X i.e., V2X and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between V2X and Ducommun Incorporated

Considering the 90-day investment horizon V2X Inc is expected to generate 1.79 times more return on investment than Ducommun Incorporated. However, V2X is 1.79 times more volatile than Ducommun Incorporated. It trades about 0.06 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about -0.01 per unit of risk. If you would invest  4,698  in V2X Inc on December 27, 2024 and sell it today you would earn a total of  386.00  from holding V2X Inc or generate 8.22% return on investment over 90 days.

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

V2X Inc  vs.  Ducommun Incorporated

V2X Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V2X Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, V2X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ducommun Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ducommun Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with V2X and Ducommun Incorporated

The main advantage of trading using opposite V2X and Ducommun Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X position performs unexpectedly, Ducommun Incorporated 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 Ducommun Incorporated will offset losses from the drop in Ducommun Incorporated's long position.

The idea behind V2X Inc and Ducommun Incorporated 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.