Correlation Between Airbus Group and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Airbus Group 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 Airbus Group and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Airbus Group NV and BAE Systems PLC, you can compare the effects of market volatilities on Airbus Group 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 Airbus Group with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and BAE Systems.
Diversification Opportunities for Airbus Group and BAE Systems
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Airbus and BAE is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Airbus Group NV 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 Airbus Group 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 Airbus Group NV 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 Airbus Group i.e., Airbus Group and BAE Systems go up and down completely randomly.
Pair Corralation between Airbus Group and BAE Systems
Assuming the 90 days horizon Airbus Group NV is expected to under-perform the BAE Systems. In addition to that, Airbus Group is 1.14 times more volatile than BAE Systems PLC. It trades about -0.07 of its total potential returns per unit of risk. BAE Systems PLC is currently generating about -0.02 per unit of volatility. If you would invest 6,941 in BAE Systems PLC on August 25, 2024 and sell it today you would lose (343.00) from holding BAE Systems PLC or give up 4.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airbus Group NV vs. BAE Systems PLC
Performance |
| Timeline |
| Airbus Group NV |
| BAE Systems PLC |
Airbus Group and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airbus Group and BAE Systems
The main advantage of trading using opposite Airbus Group and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbus Group 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.| Airbus Group vs. Safran SA | Airbus Group vs. Moog Inc | Airbus Group vs. BAE Systems PLC | Airbus Group vs. Airbus Group SE |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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