Correlation Between VirTra and MTU Aero
Can any of the company-specific risk be diversified away by investing in both VirTra and MTU Aero 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 VirTra and MTU Aero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VirTra Inc and MTU Aero Engines, you can compare the effects of market volatilities on VirTra and MTU Aero 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 VirTra with a short position of MTU Aero. Check out your portfolio center. Please also check ongoing floating volatility patterns of VirTra and MTU Aero.
Diversification Opportunities for VirTra and MTU Aero
Very weak diversification
The 3 months correlation between VirTra and MTU is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding VirTra Inc and MTU Aero Engines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTU Aero Engines and VirTra 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 VirTra Inc are associated (or correlated) with MTU Aero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTU Aero Engines has no effect on the direction of VirTra i.e., VirTra and MTU Aero go up and down completely randomly.
Pair Corralation between VirTra and MTU Aero
Given the investment horizon of 90 days VirTra Inc is expected to generate 3.33 times more return on investment than MTU Aero. However, VirTra is 3.33 times more volatile than MTU Aero Engines. It trades about 0.11 of its potential returns per unit of risk. MTU Aero Engines is currently generating about 0.19 per unit of risk. If you would invest 604.00 in VirTra Inc on September 5, 2024 and sell it today you would earn a total of 118.00 from holding VirTra Inc or generate 19.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VirTra Inc vs. MTU Aero Engines
Performance |
| Timeline |
| VirTra Inc |
| MTU Aero Engines |
VirTra and MTU Aero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VirTra and MTU Aero
The main advantage of trading using opposite VirTra and MTU Aero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VirTra position performs unexpectedly, MTU Aero 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 MTU Aero will offset losses from the drop in MTU Aero's long position.| VirTra vs. Innovative Solutions and | VirTra vs. Park Electrochemical | VirTra vs. Ducommun Incorporated | VirTra vs. National Presto Industries |
| MTU Aero vs. Rolls Royce Holdings PLC | MTU Aero vs. VirTra Inc | MTU Aero vs. BWX Technologies | MTU Aero vs. Embraer SA ADR |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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