Correlation Between Aerojet Rocketdyne and National Presto

Can any of the company-specific risk be diversified away by investing in both Aerojet Rocketdyne and National Presto 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 Aerojet Rocketdyne and National Presto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aerojet Rocketdyne Holdings and National Presto Industries, you can compare the effects of market volatilities on Aerojet Rocketdyne and National Presto 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 Aerojet Rocketdyne with a short position of National Presto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerojet Rocketdyne and National Presto.

Diversification Opportunities for Aerojet Rocketdyne and National Presto

0.23

Correlation Coefficient

Aerojet Rocketdyne  National Presto

Modest diversification

The 3 months correlation between Aerojet and National is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aerojet Rocketdyne Holdings and National Presto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Presto Indu and Aerojet Rocketdyne 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 Aerojet Rocketdyne Holdings are associated (or correlated) with National Presto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Presto Indu has no effect on the direction of Aerojet Rocketdyne i.e., Aerojet Rocketdyne and National Presto go up and down completely randomly.

Pair Corralation between Aerojet Rocketdyne and National Presto

If you would invest  7,669  in National Presto Industries on September 13, 2024 and sell it today you would earn a total of  1,581  from holding National Presto Industries or generate 20.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Aerojet Rocketdyne Holdings  vs.  National Presto Industries

Aerojet Rocketdyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerojet Rocketdyne Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aerojet Rocketdyne is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

National Presto Indu

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Presto Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, National Presto disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerojet Rocketdyne and National Presto

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

The idea behind Aerojet Rocketdyne Holdings and National Presto Industries 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.