Correlation Between NYSE Composite and AeroVironment
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and AeroVironment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and AeroVironment, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and AeroVironment.
Diversification Opportunities for NYSE Composite and AeroVironment
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and AeroVironment is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and AeroVironment go up and down completely randomly.
Pair Corralation between NYSE Composite and AeroVironment
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.25 times more return on investment than AeroVironment. However, NYSE Composite is 3.96 times less risky than AeroVironment. It trades about 0.13 of its potential returns per unit of risk. AeroVironment is currently generating about -0.16 per unit of risk. If you would invest 1,959,424 in NYSE Composite on August 24, 2024 and sell it today you would earn a total of 37,406 from holding NYSE Composite or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. AeroVironment
Performance |
| Timeline |
NYSE Composite and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
AeroVironment
Pair trading matchups for AeroVironment
Pair Trading with NYSE Composite and AeroVironment
The main advantage of trading using opposite NYSE Composite and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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