Correlation Between V2X and AeroVironment
Can any of the company-specific risk be diversified away by investing in both V2X and AeroVironment 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 V2X and AeroVironment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between V2X Inc and AeroVironment, you can compare the effects of market volatilities on V2X and AeroVironment 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 V2X with a short position of AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and AeroVironment.
Diversification Opportunities for V2X and AeroVironment
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between V2X and AeroVironment is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and V2X 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 V2X Inc are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of V2X i.e., V2X and AeroVironment go up and down completely randomly.
Pair Corralation between V2X and AeroVironment
Considering the 90-day investment horizon V2X Inc is expected to generate 1.4 times more return on investment than AeroVironment. However, V2X is 1.4 times more volatile than AeroVironment. It trades about 0.34 of its potential returns per unit of risk. AeroVironment is currently generating about 0.18 per unit of risk. If you would invest 4,844 in V2X Inc on October 23, 2024 and sell it today you would earn a total of 672.00 from holding V2X Inc or generate 13.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
V2X Inc vs. AeroVironment
Performance |
| Timeline |
| V2X Inc |
| AeroVironment |
V2X and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with V2X and AeroVironment
The main advantage of trading using opposite V2X and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.The idea behind V2X Inc and AeroVironment 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.| AeroVironment vs. L3Harris Technologies | AeroVironment vs. Mercury Systems | AeroVironment vs. Textron | AeroVironment vs. HEICO |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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