Correlation Between BAE Systems and V2X
Can any of the company-specific risk be diversified away by investing in both BAE Systems and V2X 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 V2X 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 V2X Inc, you can compare the effects of market volatilities on BAE Systems and V2X 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 V2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and V2X.
Diversification Opportunities for BAE Systems and V2X
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between BAE and V2X is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems PLC and V2X Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V2X Inc 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 V2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V2X Inc has no effect on the direction of BAE Systems i.e., BAE Systems and V2X go up and down completely randomly.
Pair Corralation between BAE Systems and V2X
Assuming the 90 days horizon BAE Systems PLC is expected to under-perform the V2X. But the pink sheet apears to be less risky and, when comparing its historical volatility, BAE Systems PLC is 1.84 times less risky than V2X. The pink sheet trades about -0.02 of its potential returns per unit of risk. The V2X Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,599 in V2X Inc on August 28, 2024 and sell it today you would earn a total of 1,461 from holding V2X Inc or generate 31.77% 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. V2X Inc
Performance |
| Timeline |
| BAE Systems PLC |
| V2X Inc |
BAE Systems and V2X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAE Systems and V2X
The main advantage of trading using opposite BAE Systems and V2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems position performs unexpectedly, V2X 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 V2X will offset losses from the drop in V2X's long position.| BAE Systems vs. Element Solutions | BAE Systems vs. Orion Engineered Carbons | BAE Systems vs. Minerals Technologies | BAE Systems vs. Ingevity Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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