Correlation Between Howmet Aerospace and AAR Corp
Can any of the company-specific risk be diversified away by investing in both Howmet Aerospace and AAR Corp 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 Howmet Aerospace and AAR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Howmet Aerospace and AAR Corp, you can compare the effects of market volatilities on Howmet Aerospace and AAR Corp 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 Howmet Aerospace with a short position of AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Howmet Aerospace and AAR Corp.
Diversification Opportunities for Howmet Aerospace and AAR Corp
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Howmet and AAR is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Howmet Aerospace 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 Howmet Aerospace are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and AAR Corp go up and down completely randomly.
Pair Corralation between Howmet Aerospace and AAR Corp
Considering the 90-day investment horizon Howmet Aerospace is expected to generate 1.05 times more return on investment than AAR Corp. However, Howmet Aerospace is 1.05 times more volatile than AAR Corp. It trades about 0.23 of its potential returns per unit of risk. AAR Corp is currently generating about 0.22 per unit of risk. If you would invest 10,107 in Howmet Aerospace on August 31, 2024 and sell it today you would earn a total of 1,563 from holding Howmet Aerospace or generate 15.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Howmet Aerospace vs. AAR Corp
Performance |
| Timeline |
| Howmet Aerospace |
| AAR Corp |
Howmet Aerospace and AAR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Howmet Aerospace and AAR Corp
The main advantage of trading using opposite Howmet Aerospace and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Howmet Aerospace position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.| Howmet Aerospace vs. Curtiss Wright | Howmet Aerospace vs. Mercury Systems | Howmet Aerospace vs. AAR Corp | Howmet Aerospace vs. Ducommun Incorporated |
| AAR Corp vs. Curtiss Wright | AAR Corp vs. Hexcel | AAR Corp vs. Moog Inc | AAR Corp vs. Ducommun Incorporated |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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