Correlation Between Leonardo SpA and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Leonardo SpA 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 Leonardo SpA and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leonardo SpA ADR and BAE Systems PLC, you can compare the effects of market volatilities on Leonardo SpA 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 Leonardo SpA with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo SpA and BAE Systems.
Diversification Opportunities for Leonardo SpA and BAE Systems
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leonardo and BAE is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo SpA ADR 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 Leonardo SpA 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 Leonardo SpA ADR 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 Leonardo SpA i.e., Leonardo SpA and BAE Systems go up and down completely randomly.
Pair Corralation between Leonardo SpA and BAE Systems
Assuming the 90 days horizon Leonardo SpA ADR is expected to generate 1.5 times more return on investment than BAE Systems. However, Leonardo SpA is 1.5 times more volatile than BAE Systems PLC. It trades about 0.12 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 752.00 in Leonardo SpA ADR on September 4, 2024 and sell it today you would earn a total of 602.00 from holding Leonardo SpA ADR or generate 80.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leonardo SpA ADR vs. BAE Systems PLC
Performance |
| Timeline |
| Leonardo SpA ADR |
| BAE Systems PLC |
Leonardo SpA and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leonardo SpA and BAE Systems
The main advantage of trading using opposite Leonardo SpA and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leonardo SpA 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.| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
| BAE Systems vs. Leonardo Spa | BAE Systems vs. QinetiQ Group plc | BAE Systems vs. Leonardo SpA ADR | BAE Systems vs. Huntington Ingalls Industries |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |