Correlation Between V2X and BAE Systems
Can any of the company-specific risk be diversified away by investing in both V2X 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 V2X and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between V2X Inc and BAE Systems PLC, you can compare the effects of market volatilities on V2X 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 V2X with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and BAE Systems.
Diversification Opportunities for V2X and BAE Systems
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between V2X and BAE is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc 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 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 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 V2X i.e., V2X and BAE Systems go up and down completely randomly.
Pair Corralation between V2X and BAE Systems
Considering the 90-day investment horizon V2X Inc is expected to generate 1.84 times more return on investment than BAE Systems. However, V2X is 1.84 times more volatile than BAE Systems PLC. It trades about 0.09 of its potential returns per unit of risk. BAE Systems PLC is currently generating about -0.02 per unit of risk. If you would invest 4,599 in V2X Inc on August 28, 2024 and sell it today you would earn a total of 1,461 from holding V2X Inc or generate 31.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
V2X Inc vs. BAE Systems PLC
Performance |
| Timeline |
| V2X Inc |
| BAE Systems PLC |
V2X and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with V2X and BAE Systems
The main advantage of trading using opposite V2X and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X 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.The idea behind V2X Inc and BAE Systems PLC 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.| BAE Systems vs. Element Solutions | BAE Systems vs. Orion Engineered Carbons | BAE Systems vs. Minerals Technologies | BAE Systems vs. Ingevity Corp |
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 CEOs Directory module to screen CEOs from public companies around the world.
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