Correlation Between Lilium NV and Northrop Grumman
Can any of the company-specific risk be diversified away by investing in both Lilium NV and Northrop Grumman 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 Lilium NV and Northrop Grumman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lilium NV and Northrop Grumman, you can compare the effects of market volatilities on Lilium NV and Northrop Grumman 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 Lilium NV with a short position of Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lilium NV and Northrop Grumman.
Diversification Opportunities for Lilium NV and Northrop Grumman
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lilium and Northrop is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman and Lilium NV 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 Lilium NV are associated (or correlated) with Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of Lilium NV i.e., Lilium NV and Northrop Grumman go up and down completely randomly.
Pair Corralation between Lilium NV and Northrop Grumman
Given the investment horizon of 90 days Lilium NV is expected to generate 21.82 times more return on investment than Northrop Grumman. However, Lilium NV is 21.82 times more volatile than Northrop Grumman. It trades about 0.15 of its potential returns per unit of risk. Northrop Grumman is currently generating about -0.12 per unit of risk. If you would invest 8.25 in Lilium NV on September 5, 2024 and sell it today you would earn a total of 1.75 from holding Lilium NV or generate 21.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lilium NV vs. Northrop Grumman
Performance |
| Timeline |
| Lilium NV |
| Northrop Grumman |
Lilium NV and Northrop Grumman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lilium NV and Northrop Grumman
The main advantage of trading using opposite Lilium NV and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lilium NV position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.| Lilium NV vs. Vertical Aerospace | Lilium NV vs. Ehang Holdings | Lilium NV vs. Rocket Lab USA | Lilium NV vs. Archer Aviation |
| Northrop Grumman vs. Archer Aviation | Northrop Grumman vs. Rocket Lab USA | Northrop Grumman vs. Lilium NV | Northrop Grumman vs. HEICO |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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