Correlation Between Element Solutions and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Element Solutions 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 Element Solutions and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Solutions and BAE Systems PLC, you can compare the effects of market volatilities on Element Solutions 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 Element Solutions with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and BAE Systems.
Diversification Opportunities for Element Solutions and BAE Systems
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Element and BAE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions 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 Element Solutions 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 Element Solutions 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 Element Solutions i.e., Element Solutions and BAE Systems go up and down completely randomly.
Pair Corralation between Element Solutions and BAE Systems
Considering the 90-day investment horizon Element Solutions is expected to generate 0.78 times more return on investment than BAE Systems. However, Element Solutions is 1.28 times less risky than BAE Systems. It trades about 0.21 of its potential returns per unit of risk. BAE Systems PLC is currently generating about -0.06 per unit of risk. If you would invest 2,667 in Element Solutions on August 29, 2024 and sell it today you would earn a total of 198.00 from holding Element Solutions or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Element Solutions vs. BAE Systems PLC
Performance |
| Timeline |
| Element Solutions |
| BAE Systems PLC |
Element Solutions and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Element Solutions and BAE Systems
The main advantage of trading using opposite Element Solutions and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions 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.| Element Solutions vs. Oil Dri | Element Solutions vs. Quaker Chemical | Element Solutions vs. Ecovyst | Element Solutions vs. Minerals Technologies |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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