Correlation Between Airbus Group and Dassault Aviation

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

By analyzing existing cross correlation between Airbus Group SE and Dassault Aviation SA, you can compare the effects of market volatilities on Airbus Group and Dassault Aviation 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 Airbus Group with a short position of Dassault Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and Dassault Aviation.

Diversification Opportunities for Airbus Group and Dassault Aviation

0.76

Correlation Coefficient

Airbus Group  Dassault Aviation

Poor diversification

The 3 months correlation between Airbus and Dassault is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Airbus Group SE and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation and Airbus Group 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 Airbus Group SE are associated (or correlated) with Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Airbus Group i.e., Airbus Group and Dassault Aviation go up and down completely randomly.

Pair Corralation between Airbus Group and Dassault Aviation

Assuming the 90 days trading horizon Airbus Group SE is expected to under-perform the Dassault Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Airbus Group SE is 1.11 times less risky than Dassault Aviation. The stock trades about -0.18 of its potential returns per unit of risk. The Dassault Aviation SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  20,420  in Dassault Aviation SA on January 30, 2024 and sell it today you would lose (40.00) from holding Dassault Aviation SA or give up 0.2% of portfolio value over 90 days.

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

Airbus Group SE  vs.  Dassault Aviation SA

Airbus Group SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Airbus Group may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Dassault Aviation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dassault Aviation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Airbus Group and Dassault Aviation

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

The idea behind Airbus Group SE and Dassault Aviation SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.