Correlation Between BAE Systems and Huntington Ingalls
Can any of the company-specific risk be diversified away by investing in both BAE Systems and Huntington Ingalls 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 BAE Systems and Huntington Ingalls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BAE Systems PLC and Huntington Ingalls Industries, you can compare the effects of market volatilities on BAE Systems and Huntington Ingalls 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 BAE Systems with a short position of Huntington Ingalls. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and Huntington Ingalls.
Diversification Opportunities for BAE Systems and Huntington Ingalls
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BAE and Huntington is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems PLC and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls and BAE Systems 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 BAE Systems PLC are associated (or correlated) with Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of BAE Systems i.e., BAE Systems and Huntington Ingalls go up and down completely randomly.
Pair Corralation between BAE Systems and Huntington Ingalls
Assuming the 90 days horizon BAE Systems PLC is expected to generate 0.45 times more return on investment than Huntington Ingalls. However, BAE Systems PLC is 2.24 times less risky than Huntington Ingalls. It trades about 0.01 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.16 per unit of risk. If you would invest 1,663 in BAE Systems PLC on August 28, 2024 and sell it today you would earn a total of 1.00 from holding BAE Systems PLC or generate 0.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BAE Systems PLC vs. Huntington Ingalls Industries
Performance |
| Timeline |
| BAE Systems PLC |
| Huntington Ingalls |
BAE Systems and Huntington Ingalls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAE Systems and Huntington Ingalls
The main advantage of trading using opposite BAE Systems and Huntington Ingalls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems position performs unexpectedly, Huntington Ingalls 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 Huntington Ingalls will offset losses from the drop in Huntington Ingalls' long position.| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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