Correlation Between BAE Systems and Innovative Solutions
Can any of the company-specific risk be diversified away by investing in both BAE Systems 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 BAE Systems and Innovative Solutions 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 Innovative Solutions and, you can compare the effects of market volatilities on BAE Systems 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 BAE Systems with a short position of Innovative Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and Innovative Solutions.
Diversification Opportunities for BAE Systems and Innovative Solutions
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between BAE and Innovative is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems PLC 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 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 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 BAE Systems i.e., BAE Systems and Innovative Solutions go up and down completely randomly.
Pair Corralation between BAE Systems and Innovative Solutions
Assuming the 90 days horizon BAE Systems PLC is expected to under-perform the Innovative Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, BAE Systems PLC is 1.33 times less risky than Innovative Solutions. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Innovative Solutions and is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 629.00 in Innovative Solutions and on August 25, 2024 and sell it today you would earn a total of 141.00 from holding Innovative Solutions and or generate 22.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BAE Systems PLC vs. Innovative Solutions and
Performance |
| Timeline |
| BAE Systems PLC |
| Innovative Solutions and |
BAE Systems and Innovative Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAE Systems and Innovative Solutions
The main advantage of trading using opposite BAE Systems and Innovative Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems 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.| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |