Correlation Between AeroVironment and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both AeroVironment and China BlueChemical 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 AeroVironment and China BlueChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AeroVironment and China BlueChemical, you can compare the effects of market volatilities on AeroVironment and China BlueChemical 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 AeroVironment with a short position of China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AeroVironment and China BlueChemical.
Diversification Opportunities for AeroVironment and China BlueChemical
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AeroVironment and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and AeroVironment 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 AeroVironment are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of AeroVironment i.e., AeroVironment and China BlueChemical go up and down completely randomly.
Pair Corralation between AeroVironment and China BlueChemical
Assuming the 90 days horizon AeroVironment is expected to generate 0.87 times more return on investment than China BlueChemical. However, AeroVironment is 1.15 times less risky than China BlueChemical. It trades about 0.06 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.03 per unit of risk. If you would invest 8,234 in AeroVironment on September 3, 2024 and sell it today you would earn a total of 10,306 from holding AeroVironment or generate 125.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AeroVironment vs. China BlueChemical
Performance |
| Timeline |
| AeroVironment |
| China BlueChemical |
AeroVironment and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AeroVironment and China BlueChemical
The main advantage of trading using opposite AeroVironment and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroVironment position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.| AeroVironment vs. China BlueChemical | AeroVironment vs. PT Bank Maybank | AeroVironment vs. Webster Financial | AeroVironment vs. UNITED UTILITIES GR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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