Correlation Between BAE Systems and London Stock
Can any of the company-specific risk be diversified away by investing in both BAE Systems and London Stock 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 London Stock 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 London Stock Exchange, you can compare the effects of market volatilities on BAE Systems and London Stock 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 London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and London Stock.
Diversification Opportunities for BAE Systems and London Stock
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BAE and London is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems plc and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange 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 London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of BAE Systems i.e., BAE Systems and London Stock go up and down completely randomly.
Pair Corralation between BAE Systems and London Stock
Assuming the 90 days trading horizon BAE Systems is expected to generate 1.31 times less return on investment than London Stock. In addition to that, BAE Systems is 1.49 times more volatile than London Stock Exchange. It trades about 0.06 of its total potential returns per unit of risk. London Stock Exchange is currently generating about 0.12 per unit of volatility. If you would invest 695,730 in London Stock Exchange on September 24, 2024 and sell it today you would earn a total of 436,270 from holding London Stock Exchange or generate 62.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
BAE Systems plc vs. London Stock Exchange
Performance |
Timeline |
BAE Systems plc |
London Stock Exchange |
BAE Systems and London Stock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BAE Systems and London Stock
The main advantage of trading using opposite BAE Systems and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock's long position.BAE Systems vs. Samsung Electronics Co | ||
BAE Systems vs. Samsung Electronics Co | ||
BAE Systems vs. Hyundai Motor | ||
BAE Systems vs. Toyota Motor Corp |
London Stock vs. Tungsten West PLC | ||
London Stock vs. Argo Group Limited | ||
London Stock vs. Hardide PLC | ||
London Stock vs. Gfinity PLC |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |