Correlation Between BAE Systems and Airbus Group
Can any of the company-specific risk be diversified away by investing in both BAE Systems and Airbus Group 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 Airbus Group 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 Airbus Group SE, you can compare the effects of market volatilities on BAE Systems and Airbus Group 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 Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and Airbus Group.
Diversification Opportunities for BAE Systems and Airbus Group
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BAE and Airbus is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems PLC and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of BAE Systems i.e., BAE Systems and Airbus Group go up and down completely randomly.
Pair Corralation between BAE Systems and Airbus Group
Assuming the 90 days horizon BAE Systems PLC is expected to generate 0.95 times more return on investment than Airbus Group. However, BAE Systems PLC is 1.05 times less risky than Airbus Group. It trades about -0.02 of its potential returns per unit of risk. Airbus Group SE is currently generating about -0.05 per unit of risk. If you would invest 6,697 in BAE Systems PLC on August 25, 2024 and sell it today you would lose (99.00) from holding BAE Systems PLC or give up 1.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BAE Systems PLC vs. Airbus Group SE
Performance |
| Timeline |
| BAE Systems PLC |
| Airbus Group SE |
BAE Systems and Airbus Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAE Systems and Airbus Group
The main advantage of trading using opposite BAE Systems and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems position performs unexpectedly, Airbus Group 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 Airbus Group will offset losses from the drop in Airbus Group's long position.| BAE Systems vs. Element Solutions | BAE Systems vs. Orion Engineered Carbons | BAE Systems vs. Minerals Technologies | BAE Systems vs. Ingevity Corp |
| Airbus Group vs. Airbus Group NV | Airbus Group vs. Park Electrochemical | Airbus Group vs. Rolls Royce Holdings PLC | Airbus Group vs. Triumph Group |
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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