Correlation Between Airbus SE and Raytheon Technologies

Can any of the company-specific risk be diversified away by investing in both Airbus SE and Raytheon Technologies 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 Airbus SE and Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Airbus SE and Raytheon Technologies Corp, you can compare the effects of market volatilities on Airbus SE and Raytheon Technologies 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 Airbus SE with a short position of Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus SE and Raytheon Technologies.

Diversification Opportunities for Airbus SE and Raytheon Technologies

0.28

Correlation Coefficient

Airbus SE  Raytheon Technologies

Modest diversification

The 3 months correlation between Airbus and Raytheon is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Airbus SE and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Airbus SE 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 Airbus SE are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Airbus SE i.e., Airbus SE and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Airbus SE and Raytheon Technologies

Assuming the 90 days trading horizon Airbus SE is expected to generate 1.54 times more return on investment than Raytheon Technologies. However, Airbus SE is 1.54 times more volatile than Raytheon Technologies Corp. It trades about 0.18 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about -0.12 per unit of risk. If you would invest  3,540  in Airbus SE on September 12, 2024 and sell it today you would earn a total of  300.00  from holding Airbus SE or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Airbus SE  vs.  Raytheon Technologies Corp

Airbus SE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airbus SE reported solid returns over the last few months and may actually be approaching a breakup point.

Raytheon Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Airbus SE and Raytheon Technologies

The main advantage of trading using opposite Airbus SE and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbus SE position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.

The idea behind Airbus SE and Raytheon Technologies Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.