Correlation Between AAR Corp and Innovative Solutions
Can any of the company-specific risk be diversified away by investing in both AAR Corp and Innovative Solutions 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 Innovative Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Innovative Solutions and, you can compare the effects of market volatilities on AAR Corp and Innovative Solutions 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 Innovative Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Innovative Solutions.
Diversification Opportunities for AAR Corp and Innovative Solutions
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between AAR and Innovative is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and 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 Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of AAR Corp i.e., AAR Corp and Innovative Solutions go up and down completely randomly.
Pair Corralation between AAR Corp and Innovative Solutions
Considering the 90-day investment horizon AAR Corp is expected to generate 3.04 times less return on investment than Innovative Solutions. But when comparing it to its historical volatility, AAR Corp is 1.52 times less risky than Innovative Solutions. It trades about 0.01 of its potential returns per unit of risk. Innovative Solutions and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 740.00 in Innovative Solutions and on August 26, 2024 and sell it today you would earn a total of 30.00 from holding Innovative Solutions and or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAR Corp vs. Innovative Solutions and
Performance |
| Timeline |
| AAR Corp |
| Innovative Solutions and |
AAR Corp and Innovative Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Innovative Solutions
The main advantage of trading using opposite AAR Corp and Innovative Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp position performs unexpectedly, Innovative Solutions 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 Innovative Solutions will offset losses from the drop in Innovative Solutions' long position.The idea behind AAR Corp and Innovative Solutions and 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.| Innovative Solutions vs. Park Electrochemical | Innovative Solutions vs. VSE Corporation | Innovative Solutions vs. Curtiss Wright | Innovative Solutions vs. Ducommun Incorporated |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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