Correlation Between CPI Aerostructures and Austal

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

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

Diversification Opportunities for CPI Aerostructures and Austal

0.47

Correlation Coefficient

CPI Aerostructures  Austal

Very weak diversification

The 3 months correlation between CPI and Austal is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and Austal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austal Limited and CPI Aerostructures 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 CPI Aerostructures are associated (or correlated) with Austal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austal Limited has no effect on the direction of CPI Aerostructures i.e., CPI Aerostructures and Austal go up and down completely randomly.

Pair Corralation between CPI Aerostructures and Austal

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 1.2 times less return on investment than Austal. But when comparing it to its historical volatility, CPI Aerostructures is 1.41 times less risky than Austal. It trades about 0.13 of its potential returns per unit of risk. Austal Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CPI Aerostructures  vs.  Austal Limited

CPI Aerostructures

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Aerostructures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CPI Aerostructures unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with CPI Aerostructures and Austal

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

The idea behind CPI Aerostructures and Austal Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.