Correlation Between Air Industries and Ducommun Incorporated

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

By analyzing existing cross correlation between Air Industries Group and Ducommun Incorporated, you can compare the effects of market volatilities on Air Industries and Ducommun Incorporated 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 Air Industries with a short position of Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Industries and Ducommun Incorporated.

Diversification Opportunities for Air Industries and Ducommun Incorporated

-0.14

Correlation Coefficient

Air Industries  Ducommun Incorporated

Good diversification

The 3 months correlation between Air and Ducommun is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Air Industries Group and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and Air Industries 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 Air Industries Group are associated (or correlated) with Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of Air Industries i.e., Air Industries and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between Air Industries and Ducommun Incorporated

Given the investment horizon of 90 days Air Industries Group is expected to under-perform the Ducommun Incorporated. In addition to that, Air Industries is 3.31 times more volatile than Ducommun Incorporated. It trades about -0.07 of its total potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.01 per unit of volatility. If you would invest  6,491  in Ducommun Incorporated on August 23, 2024 and sell it today you would earn a total of  22.00  from holding Ducommun Incorporated or generate 0.34% return on investment over 90 days.

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

Air Industries Group  vs.  Ducommun Incorporated

Air Industries Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Industries Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ducommun Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ducommun Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Air Industries and Ducommun Incorporated

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

The idea behind Air Industries Group and Ducommun Incorporated 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.