Correlation Between BAE Systems and EVS Broadcast

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

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

Diversification Opportunities for BAE Systems and EVS Broadcast

-0.81

Correlation Coefficient

BAE Systems  EVS Broadcast

Pay attention - limited upside

The 3 months correlation between BAE and EVS is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems plc and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment and BAE Systems 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 BAE Systems plc are associated (or correlated) with EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of BAE Systems i.e., BAE Systems and EVS Broadcast go up and down completely randomly.

Pair Corralation between BAE Systems and EVS Broadcast

Assuming the 90 days trading horizon BAE Systems plc is expected to under-perform the EVS Broadcast. In addition to that, BAE Systems is 1.34 times more volatile than EVS Broadcast Equipment. It trades about -0.07 of its total potential returns per unit of risk. EVS Broadcast Equipment is currently generating about 0.11 per unit of volatility. If you would invest  2,834  in EVS Broadcast Equipment on September 25, 2024 and sell it today you would earn a total of  246.00  from holding EVS Broadcast Equipment or generate 8.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

BAE Systems plc  vs.  EVS Broadcast Equipment

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.

EVS Broadcast Equipment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVS Broadcast Equipment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EVS Broadcast may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BAE Systems and EVS Broadcast

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

The idea behind BAE Systems plc and EVS Broadcast Equipment 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.