Correlation Between MTU Aero and Leonardo SpA
Can any of the company-specific risk be diversified away by investing in both MTU Aero and Leonardo SpA 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 MTU Aero and Leonardo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTU Aero Engines and Leonardo SpA ADR, you can compare the effects of market volatilities on MTU Aero and Leonardo SpA 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 MTU Aero with a short position of Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTU Aero and Leonardo SpA.
Diversification Opportunities for MTU Aero and Leonardo SpA
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MTU and Leonardo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MTU Aero Engines and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR and MTU Aero 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 MTU Aero Engines are associated (or correlated) with Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of MTU Aero i.e., MTU Aero and Leonardo SpA go up and down completely randomly.
Pair Corralation between MTU Aero and Leonardo SpA
Assuming the 90 days horizon MTU Aero Engines is expected to under-perform the Leonardo SpA. But the pink sheet apears to be less risky and, when comparing its historical volatility, MTU Aero Engines is 1.67 times less risky than Leonardo SpA. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Leonardo SpA ADR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,194 in Leonardo SpA ADR on August 27, 2024 and sell it today you would earn a total of 114.00 from holding Leonardo SpA ADR or generate 9.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTU Aero Engines vs. Leonardo SpA ADR
Performance |
| Timeline |
| MTU Aero Engines |
| Leonardo SpA ADR |
MTU Aero and Leonardo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTU Aero and Leonardo SpA
The main advantage of trading using opposite MTU Aero and Leonardo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTU Aero position performs unexpectedly, Leonardo SpA 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 Leonardo SpA will offset losses from the drop in Leonardo SpA's long position.| MTU Aero vs. Safran SA | MTU Aero vs. MTU Aero Engines | MTU Aero vs. Thales SA ADR | MTU Aero vs. Hannover Re |
| Leonardo SpA vs. Moog Inc | Leonardo SpA vs. BAE Systems PLC | Leonardo SpA vs. Park Electrochemical | Leonardo SpA vs. Triumph Group |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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