Correlation Between Mercury Systems and AeroVironment
Can any of the company-specific risk be diversified away by investing in both Mercury Systems and AeroVironment 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 Mercury Systems and AeroVironment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercury Systems and AeroVironment, you can compare the effects of market volatilities on Mercury Systems and AeroVironment 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 Mercury Systems with a short position of AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercury Systems and AeroVironment.
Diversification Opportunities for Mercury Systems and AeroVironment
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Mercury and AeroVironment is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Systems and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and Mercury Systems 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 Mercury Systems are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Mercury Systems i.e., Mercury Systems and AeroVironment go up and down completely randomly.
Pair Corralation between Mercury Systems and AeroVironment
Given the investment horizon of 90 days Mercury Systems is expected to generate 0.85 times more return on investment than AeroVironment. However, Mercury Systems is 1.17 times less risky than AeroVironment. It trades about 0.08 of its potential returns per unit of risk. AeroVironment is currently generating about 0.06 per unit of risk. If you would invest 2,680 in Mercury Systems on November 3, 2024 and sell it today you would earn a total of 1,489 from holding Mercury Systems or generate 55.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Mercury Systems vs. AeroVironment
Performance |
| Timeline |
| Mercury Systems |
| AeroVironment |
Mercury Systems and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercury Systems and AeroVironment
The main advantage of trading using opposite Mercury Systems and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercury Systems position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.| Mercury Systems vs. Curtiss Wright | Mercury Systems vs. Hexcel | Mercury Systems vs. Ducommun Incorporated | Mercury Systems vs. Woodward |
| AeroVironment vs. L3Harris Technologies | AeroVironment vs. Mercury Systems | AeroVironment vs. Textron | AeroVironment 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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