Correlation Between Northrop Grumman and Airbus SE
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Airbus SE 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 Airbus SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Airbus SE, you can compare the effects of market volatilities on Northrop Grumman and Airbus SE 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 Airbus SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Airbus SE.
Diversification Opportunities for Northrop Grumman and Airbus SE
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Northrop and Airbus is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Airbus SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus SE 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 Airbus SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus SE has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Airbus SE go up and down completely randomly.
Pair Corralation between Northrop Grumman and Airbus SE
Assuming the 90 days horizon Northrop Grumman is expected to generate 114.83 times less return on investment than Airbus SE. In addition to that, Northrop Grumman is 1.03 times more volatile than Airbus SE. It trades about 0.0 of its total potential returns per unit of risk. Airbus SE is currently generating about 0.05 per unit of volatility. If you would invest 10,938 in Airbus SE on September 2, 2024 and sell it today you would earn a total of 3,822 from holding Airbus SE or generate 34.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northrop Grumman vs. Airbus SE
Performance |
| Timeline |
| Northrop Grumman |
| Airbus SE |
Northrop Grumman and Airbus SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrop Grumman and Airbus SE
The main advantage of trading using opposite Northrop Grumman and Airbus SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Airbus SE 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 Airbus SE will offset losses from the drop in Airbus SE's long position.The idea behind Northrop Grumman and Airbus SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Airbus SE vs. LION ONE METALS | Airbus SE vs. SERI INDUSTRIAL EO | Airbus SE vs. MCEWEN MINING INC | Airbus SE vs. Penn National Gaming |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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