Correlation Between CPI Aerostructures and BAE Systems
Can any of the company-specific risk be diversified away by investing in both CPI Aerostructures and BAE Systems 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 CPI Aerostructures and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CPI Aerostructures and BAE Systems PLC, you can compare the effects of market volatilities on CPI Aerostructures and BAE Systems 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 CPI Aerostructures with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPI Aerostructures and BAE Systems.
Diversification Opportunities for CPI Aerostructures and BAE Systems
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CPI and BAE is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and BAE Systems PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems PLC and CPI Aerostructures 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 CPI Aerostructures are associated (or correlated) with BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems PLC has no effect on the direction of CPI Aerostructures i.e., CPI Aerostructures and BAE Systems go up and down completely randomly.
Pair Corralation between CPI Aerostructures and BAE Systems
Considering the 90-day investment horizon CPI Aerostructures is expected to generate 1.47 times more return on investment than BAE Systems. However, CPI Aerostructures is 1.47 times more volatile than BAE Systems PLC. It trades about 0.16 of its potential returns per unit of risk. BAE Systems PLC is currently generating about -0.04 per unit of risk. If you would invest 333.00 in CPI Aerostructures on September 1, 2024 and sell it today you would earn a total of 48.00 from holding CPI Aerostructures or generate 14.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CPI Aerostructures vs. BAE Systems PLC
Performance |
| Timeline |
| CPI Aerostructures |
| BAE Systems PLC |
CPI Aerostructures and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CPI Aerostructures and BAE Systems
The main advantage of trading using opposite CPI Aerostructures and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPI Aerostructures position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.| CPI Aerostructures vs. Ducommun Incorporated | CPI Aerostructures vs. SIFCO Industries | CPI Aerostructures vs. Innovative Solutions and | CPI Aerostructures vs. Air Industries Group |
| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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