Correlation Between Austal and Alabama Aircraft

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

By analyzing existing cross correlation between Austal Limited and Alabama Aircraft Industries, you can compare the effects of market volatilities on Austal and Alabama Aircraft 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 Austal with a short position of Alabama Aircraft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austal and Alabama Aircraft.

Diversification Opportunities for Austal and Alabama Aircraft

-0.14

Correlation Coefficient

Austal  Alabama Aircraft

Good diversification

The 3 months correlation between Austal and Alabama is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Austal Limited and Alabama Aircraft Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alabama Aircraft Ind and Austal 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 Austal Limited are associated (or correlated) with Alabama Aircraft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alabama Aircraft Ind has no effect on the direction of Austal i.e., Austal and Alabama Aircraft go up and down completely randomly.

Pair Corralation between Austal and Alabama Aircraft

If you would invest  147.00  in Austal Limited on September 12, 2024 and sell it today you would earn a total of  43.00  from holding Austal Limited or generate 29.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Austal Limited  vs.  Alabama Aircraft Industries

Austal Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austal Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Austal reported solid returns over the last few months and may actually be approaching a breakup point.

Alabama Aircraft Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alabama Aircraft Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Alabama Aircraft is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Austal and Alabama Aircraft

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

The idea behind Austal Limited and Alabama Aircraft 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.