Correlation Between AAR Corp and Ducommun Incorporated
Can any of the company-specific risk be diversified away by investing in both AAR Corp 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 AAR Corp and Ducommun Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Ducommun Incorporated, you can compare the effects of market volatilities on AAR Corp 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 AAR Corp with a short position of Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Ducommun Incorporated.
Diversification Opportunities for AAR Corp and Ducommun Incorporated
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AAR and Ducommun is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and AAR Corp 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 AAR Corp 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 AAR Corp i.e., AAR Corp and Ducommun Incorporated go up and down completely randomly.
Pair Corralation between AAR Corp and Ducommun Incorporated
Considering the 90-day investment horizon AAR Corp is expected to generate 1.26 times more return on investment than Ducommun Incorporated. However, AAR Corp is 1.26 times more volatile than Ducommun Incorporated. It trades about 0.09 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.06 per unit of risk. If you would invest 6,367 in AAR Corp on August 26, 2024 and sell it today you would earn a total of 541.00 from holding AAR Corp or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAR Corp vs. Ducommun Incorporated
Performance |
| Timeline |
| AAR Corp |
| Ducommun Incorporated |
AAR Corp and Ducommun Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Ducommun Incorporated
The main advantage of trading using opposite AAR Corp and Ducommun Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp 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 AAR Corp 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.| Ducommun Incorporated vs. Innovative Solutions and | Ducommun Incorporated vs. National Presto Industries | Ducommun Incorporated vs. Astronics | Ducommun Incorporated vs. Park Electrochemical |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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