Correlation Between VSE and Northrop Grumman
Can any of the company-specific risk be diversified away by investing in both VSE and Northrop Grumman 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 VSE and Northrop Grumman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VSE Corporation and Northrop Grumman, you can compare the effects of market volatilities on VSE and Northrop Grumman 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 VSE with a short position of Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of VSE and Northrop Grumman.
Diversification Opportunities for VSE and Northrop Grumman
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VSE and Northrop is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman and VSE 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 VSE Corporation are associated (or correlated) with Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of VSE i.e., VSE and Northrop Grumman go up and down completely randomly.
Pair Corralation between VSE and Northrop Grumman
Given the investment horizon of 90 days VSE Corporation is expected to generate 2.41 times more return on investment than Northrop Grumman. However, VSE is 2.41 times more volatile than Northrop Grumman. It trades about 0.13 of its potential returns per unit of risk. Northrop Grumman is currently generating about 0.07 per unit of risk. If you would invest 7,728 in VSE Corporation on August 24, 2024 and sell it today you would earn a total of 3,698 from holding VSE Corporation or generate 47.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VSE Corp. vs. Northrop Grumman
Performance |
| Timeline |
| VSE Corporation |
| Northrop Grumman |
VSE and Northrop Grumman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VSE and Northrop Grumman
The main advantage of trading using opposite VSE and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VSE position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.| VSE vs. Park Electrochemical | VSE vs. Innovative Solutions and | VSE vs. Curtiss Wright | VSE vs. National Presto Industries |
| Northrop Grumman vs. Raytheon Technologies Corp | Northrop Grumman vs. General Dynamics | Northrop Grumman vs. The Boeing | Northrop Grumman vs. L3Harris Technologies |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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