Correlation Between Lilium NV and AAR Corp

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

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

Diversification Opportunities for Lilium NV and AAR Corp

0.03

Correlation Coefficient

Lilium NV  AAR Corp

Significant diversification

The 3 months correlation between Lilium and AAR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Lilium NV 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 Lilium NV are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Lilium NV i.e., Lilium NV and AAR Corp go up and down completely randomly.

Pair Corralation between Lilium NV and AAR Corp

Given the investment horizon of 90 days Lilium NV is expected to under-perform the AAR Corp. In addition to that, Lilium NV is 4.63 times more volatile than AAR Corp. It trades about -0.01 of its total potential returns per unit of risk. AAR Corp is currently generating about 0.05 per unit of volatility. If you would invest  4,623  in AAR Corp on September 2, 2024 and sell it today you would earn a total of  2,329  from holding AAR Corp or generate 50.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lilium NV  vs.  AAR Corp

Lilium NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lilium NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AAR Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, AAR Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lilium NV and AAR Corp

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

The idea behind Lilium NV and AAR Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.