Correlation Between Northrop Grumman and Eve Holding
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Eve Holding 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 Northrop Grumman and Eve Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Eve Holding, you can compare the effects of market volatilities on Northrop Grumman and Eve Holding 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 Northrop Grumman with a short position of Eve Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Eve Holding.
Diversification Opportunities for Northrop Grumman and Eve Holding
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Northrop and Eve is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Eve Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eve Holding and Northrop Grumman 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 Northrop Grumman are associated (or correlated) with Eve Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eve Holding has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Eve Holding go up and down completely randomly.
Pair Corralation between Northrop Grumman and Eve Holding
Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.35 times more return on investment than Eve Holding. However, Northrop Grumman is 2.86 times less risky than Eve Holding. It trades about 0.03 of its potential returns per unit of risk. Eve Holding is currently generating about -0.03 per unit of risk. If you would invest 43,624 in Northrop Grumman on August 27, 2024 and sell it today you would earn a total of 6,063 from holding Northrop Grumman or generate 13.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northrop Grumman vs. Eve Holding
Performance |
| Timeline |
| Northrop Grumman |
| Eve Holding |
Northrop Grumman and Eve Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrop Grumman and Eve Holding
The main advantage of trading using opposite Northrop Grumman and Eve Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Eve Holding 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 Eve Holding will offset losses from the drop in Eve Holding's long position.| Northrop Grumman vs. Redwire Corp | Northrop Grumman vs. Sidus Space | Northrop Grumman vs. Rocket Lab USA | Northrop Grumman vs. Momentus |
| Eve Holding vs. Heico | Eve Holding vs. Mercury Systems | Eve Holding vs. AeroVironment | Eve Holding vs. Howmet Aerospace |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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