Correlation Between Northrop Grumman and Safran SA
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Safran SA 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 Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Safran SA, you can compare the effects of market volatilities on Northrop Grumman and Safran SA 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 Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Safran SA.
Diversification Opportunities for Northrop Grumman and Safran SA
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northrop and Safran is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Safran SA go up and down completely randomly.
Pair Corralation between Northrop Grumman and Safran SA
Considering the 90-day investment horizon Northrop Grumman is expected to generate 6.19 times less return on investment than Safran SA. But when comparing it to its historical volatility, Northrop Grumman is 1.48 times less risky than Safran SA. It trades about 0.02 of its potential returns per unit of risk. Safran SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 13,740 in Safran SA on November 2, 2024 and sell it today you would earn a total of 11,120 from holding Safran SA or generate 80.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.72% |
| Values | Daily Returns |
Northrop Grumman vs. Safran SA
Performance |
| Timeline |
| Northrop Grumman |
| Safran SA |
Northrop Grumman and Safran SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrop Grumman and Safran SA
The main advantage of trading using opposite Northrop Grumman and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Safran SA 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 Safran SA will offset losses from the drop in Safran SA's long position.| Northrop Grumman vs. Raytheon Technologies Corp | Northrop Grumman vs. General Dynamics | Northrop Grumman vs. The Boeing | Northrop Grumman vs. L3Harris Technologies |
| Safran SA vs. Thales SA ADR | Safran SA vs. MTU Aero Engines | Safran SA vs. Leonardo SpA ADR | Safran SA vs. Thales SA |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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