Correlation Between Austal and AAR Corp
Can any of the company-specific risk be diversified away by investing in both Austal 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 Austal and AAR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Austal Limited and AAR Corp, you can compare the effects of market volatilities on Austal 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 Austal with a short position of AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austal and AAR Corp.
Diversification Opportunities for Austal and AAR Corp
Good diversification
The 3 months correlation between Austal and AAR is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Austal Limited and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Austal 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 Austal Limited 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 Austal i.e., Austal and AAR Corp go up and down completely randomly.
Pair Corralation between Austal and AAR Corp
Assuming the 90 days horizon Austal Limited is expected to under-perform the AAR Corp. In addition to that, Austal is 2.09 times more volatile than AAR Corp. It trades about -0.02 of its total potential returns per unit of risk. AAR Corp is currently generating about 0.3 per unit of volatility. If you would invest 5,870 in AAR Corp on September 1, 2024 and sell it today you would earn a total of 1,082 from holding AAR Corp or generate 18.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Austal Limited vs. AAR Corp
Performance |
| Timeline |
| Austal Limited |
| AAR Corp |
Austal and AAR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Austal and AAR Corp
The main advantage of trading using opposite Austal and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austal 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.| Austal vs. Firan Technology Group | Austal vs. 808 Renewable Energy | Austal vs. Park Electrochemical | Austal vs. Innovative Solutions and |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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