Correlation Between Innovative Solutions and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Innovative 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 Innovative 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 Innovative Solutions and and BAE Systems PLC, you can compare the effects of market volatilities on Innovative 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 Innovative Solutions with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Solutions and BAE Systems.
Diversification Opportunities for Innovative Solutions and BAE Systems
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Innovative and BAE is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Solutions and 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 Innovative 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 Innovative Solutions and 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 Innovative Solutions i.e., Innovative Solutions and BAE Systems go up and down completely randomly.
Pair Corralation between Innovative Solutions and BAE Systems
Given the investment horizon of 90 days Innovative Solutions and is expected to generate 1.33 times more return on investment than BAE Systems. However, Innovative Solutions is 1.33 times more volatile than BAE Systems PLC. It trades about 0.07 of its potential returns per unit of risk. BAE Systems PLC is currently generating about -0.02 per unit of risk. If you would invest 629.00 in Innovative Solutions and on August 25, 2024 and sell it today you would earn a total of 141.00 from holding Innovative Solutions and or generate 22.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovative Solutions and vs. BAE Systems PLC
Performance |
| Timeline |
| Innovative Solutions and |
| BAE Systems PLC |
Innovative Solutions and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovative Solutions and BAE Systems
The main advantage of trading using opposite Innovative Solutions and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative 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.| Innovative Solutions vs. Park Electrochemical | Innovative Solutions vs. VSE Corporation | Innovative Solutions vs. Curtiss Wright | Innovative Solutions vs. Ducommun Incorporated |
| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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