Correlation Between Hexcel and Aerojet Rocketdyne
Can any of the company-specific risk be diversified away by investing in both Hexcel and Aerojet Rocketdyne 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 Hexcel and Aerojet Rocketdyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hexcel and Aerojet Rocketdyne Holdings, you can compare the effects of market volatilities on Hexcel and Aerojet Rocketdyne 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 Hexcel with a short position of Aerojet Rocketdyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hexcel and Aerojet Rocketdyne.
Diversification Opportunities for Hexcel and Aerojet Rocketdyne
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hexcel and Aerojet is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne and Hexcel 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 Hexcel are associated (or correlated) with Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of Hexcel i.e., Hexcel and Aerojet Rocketdyne go up and down completely randomly.
Pair Corralation between Hexcel and Aerojet Rocketdyne
Considering the 90-day investment horizon Hexcel is expected to generate 1.45 times less return on investment than Aerojet Rocketdyne. In addition to that, Hexcel is 4.35 times more volatile than Aerojet Rocketdyne Holdings. It trades about 0.01 of its total potential returns per unit of risk. Aerojet Rocketdyne Holdings is currently generating about 0.07 per unit of volatility. If you would invest 5,384 in Aerojet Rocketdyne Holdings on August 24, 2024 and sell it today you would earn a total of 238.00 from holding Aerojet Rocketdyne Holdings or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 32.06% |
| Values | Daily Returns |
Hexcel vs. Aerojet Rocketdyne Holdings
Performance |
| Timeline |
| Hexcel |
| Aerojet Rocketdyne |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Hexcel and Aerojet Rocketdyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hexcel and Aerojet Rocketdyne
The main advantage of trading using opposite Hexcel and Aerojet Rocketdyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexcel position performs unexpectedly, Aerojet Rocketdyne 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 Aerojet Rocketdyne will offset losses from the drop in Aerojet Rocketdyne's long position.The idea behind Hexcel and Aerojet Rocketdyne Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Aerojet Rocketdyne vs. AAR Corp | Aerojet Rocketdyne vs. Curtiss Wright | Aerojet Rocketdyne vs. Hexcel | Aerojet Rocketdyne vs. Moog Inc |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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