Correlation Between Snap and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Snap and BAE Systems 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 Snap and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and BAE Systems plc, you can compare the effects of market volatilities on Snap and BAE Systems 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 Snap with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and BAE Systems.
Diversification Opportunities for Snap and BAE Systems
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Snap and BAE is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and BAE Systems plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems plc and Snap 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 Snap Inc are associated (or correlated) with BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems plc has no effect on the direction of Snap i.e., Snap and BAE Systems go up and down completely randomly.
Pair Corralation between Snap and BAE Systems
Given the investment horizon of 90 days Snap Inc is expected to generate 3.05 times more return on investment than BAE Systems. However, Snap is 3.05 times more volatile than BAE Systems plc. It trades about 0.04 of its potential returns per unit of risk. BAE Systems plc is currently generating about 0.06 per unit of risk. If you would invest 827.00 in Snap Inc on August 31, 2024 and sell it today you would earn a total of 334.00 from holding Snap Inc or generate 40.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.99% |
| Values | Daily Returns |
Snap Inc vs. BAE Systems plc
Performance |
| Timeline |
| Snap Inc |
| BAE Systems plc |
Snap and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and BAE Systems
The main advantage of trading using opposite Snap and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.The idea behind Snap Inc and BAE Systems plc 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.| BAE Systems vs. Europa Metals | BAE Systems vs. Fulcrum Metals PLC | BAE Systems vs. Datalogic | BAE Systems vs. Cornish Metals |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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