Correlation Between Transdigm Group and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Transdigm Group 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 Transdigm Group and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transdigm Group Incorporated and BAE Systems PLC, you can compare the effects of market volatilities on Transdigm Group 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 Transdigm Group with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and BAE Systems.
Diversification Opportunities for Transdigm Group and BAE Systems
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Transdigm and BAE is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated 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 Transdigm Group 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 Transdigm Group Incorporated 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 Transdigm Group i.e., Transdigm Group and BAE Systems go up and down completely randomly.
Pair Corralation between Transdigm Group and BAE Systems
Considering the 90-day investment horizon Transdigm Group Incorporated is expected to generate 0.77 times more return on investment than BAE Systems. However, Transdigm Group Incorporated is 1.31 times less risky than BAE Systems. It trades about 0.09 of its potential returns per unit of risk. BAE Systems PLC is currently generating about 0.05 per unit of risk. If you would invest 92,154 in Transdigm Group Incorporated on September 2, 2024 and sell it today you would earn a total of 33,143 from holding Transdigm Group Incorporated or generate 35.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transdigm Group Incorporated vs. BAE Systems PLC
Performance |
| Timeline |
| Transdigm Group |
| BAE Systems PLC |
Transdigm Group and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transdigm Group and BAE Systems
The main advantage of trading using opposite Transdigm Group and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group 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.| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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