Correlation Between Armada Hflr and BAE Systems

Can any of the company-specific risk be diversified away by investing in both Armada Hflr 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 Armada Hflr and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and BAE Systems plc, you can compare the effects of market volatilities on Armada Hflr 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 Armada Hflr with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and BAE Systems.

Diversification Opportunities for Armada Hflr and BAE Systems

-0.01

Correlation Coefficient

Armada Hflr  BAE Systems

Good diversification

The 3 months correlation between Armada and BAE is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr 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 Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and BAE Systems go up and down completely randomly.

Pair Corralation between Armada Hflr and BAE Systems

Considering the 90-day investment horizon Armada Hflr is expected to generate 5.41 times less return on investment than BAE Systems. In addition to that, Armada Hflr is 1.21 times more volatile than BAE Systems plc. It trades about 0.01 of its total potential returns per unit of risk. BAE Systems plc is currently generating about 0.06 per unit of volatility. If you would invest  81,937  in BAE Systems plc on September 19, 2024 and sell it today you would earn a total of  35,063  from holding BAE Systems plc or generate 42.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.0%
Values	Daily Returns

Armada Hflr Pr  vs.  BAE Systems plc

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

BAE Systems plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAE Systems plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Armada Hflr and BAE Systems

The main advantage of trading using opposite Armada Hflr and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.