Correlation Between Transdigm Group and Airbus Group
Can any of the company-specific risk be diversified away by investing in both Transdigm Group and Airbus Group 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 Airbus Group 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 Airbus Group NV, you can compare the effects of market volatilities on Transdigm Group and Airbus Group 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 Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and Airbus Group.
Diversification Opportunities for Transdigm Group and Airbus Group
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Transdigm and Airbus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and Airbus Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group NV 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group NV has no effect on the direction of Transdigm Group i.e., Transdigm Group and Airbus Group go up and down completely randomly.
Pair Corralation between Transdigm Group and Airbus Group
Considering the 90-day investment horizon Transdigm Group Incorporated is expected to generate 0.96 times more return on investment than Airbus Group. However, Transdigm Group Incorporated is 1.04 times less risky than Airbus Group. It trades about 0.04 of its potential returns per unit of risk. Airbus Group NV is currently generating about 0.01 per unit of risk. If you would invest 124,114 in Transdigm Group Incorporated on November 3, 2024 and sell it today you would earn a total of 11,220 from holding Transdigm Group Incorporated or generate 9.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.46% |
| Values | Daily Returns |
Transdigm Group Incorporated vs. Airbus Group NV
Performance |
| Timeline |
| Transdigm Group |
| Airbus Group NV |
Transdigm Group and Airbus Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transdigm Group and Airbus Group
The main advantage of trading using opposite Transdigm Group and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group position performs unexpectedly, Airbus Group 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 Group will offset losses from the drop in Airbus Group's long position.| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
| Airbus Group vs. Safran SA | Airbus Group vs. Moog Inc | Airbus Group vs. BAE Systems PLC | Airbus Group vs. Airbus Group SE |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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