Correlation Between Defense And and Automotive Portfolio
Can any of the company-specific risk be diversified away by investing in both Defense And and Automotive Portfolio 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 Defense And and Automotive Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defense And Aerospace and Automotive Portfolio Automotive, you can compare the effects of market volatilities on Defense And and Automotive Portfolio 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 Defense And with a short position of Automotive Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defense And and Automotive Portfolio.
Diversification Opportunities for Defense And and Automotive Portfolio
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Defense and Automotive is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Defense And Aerospace and Automotive Portfolio Automotiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Portfolio and Defense And 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 Defense And Aerospace are associated (or correlated) with Automotive Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Portfolio has no effect on the direction of Defense And i.e., Defense And and Automotive Portfolio go up and down completely randomly.
Pair Corralation between Defense And and Automotive Portfolio
Assuming the 90 days horizon Defense And is expected to generate 1.07 times less return on investment than Automotive Portfolio. But when comparing it to its historical volatility, Defense And Aerospace is 1.02 times less risky than Automotive Portfolio. It trades about 0.23 of its potential returns per unit of risk. Automotive Portfolio Automotive is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,255 in Automotive Portfolio Automotive on September 1, 2024 and sell it today you would earn a total of 365.00 from holding Automotive Portfolio Automotive or generate 6.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Defense And Aerospace vs. Automotive Portfolio Automotiv
Performance |
| Timeline |
| Defense And Aerospace |
| Automotive Portfolio |
Defense And and Automotive Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defense And and Automotive Portfolio
The main advantage of trading using opposite Defense And and Automotive Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defense And position performs unexpectedly, Automotive Portfolio 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 Automotive Portfolio will offset losses from the drop in Automotive Portfolio's long position.| Defense And vs. Chemicals Portfolio Chemicals | Defense And vs. Construction And Housing | Defense And vs. Retailing Portfolio Retailing | Defense And vs. Health Care Services |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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