Correlation Between AeroVironment and Sturm Ruger

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

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

Diversification Opportunities for AeroVironment and Sturm Ruger

-0.29

Correlation Coefficient

AeroVironment  Sturm Ruger

Very good diversification

The 3 months correlation between AeroVironment and Sturm is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and Sturm Ruger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturm Ruger and AeroVironment 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 AeroVironment are associated (or correlated) with Sturm Ruger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sturm Ruger has no effect on the direction of AeroVironment i.e., AeroVironment and Sturm Ruger go up and down completely randomly.

Pair Corralation between AeroVironment and Sturm Ruger

Given the investment horizon of 90 days AeroVironment is expected to generate 2.33 times more return on investment than Sturm Ruger. However, AeroVironment is 2.33 times more volatile than Sturm Ruger. It trades about 0.19 of its potential returns per unit of risk. Sturm Ruger is currently generating about -0.05 per unit of risk. If you would invest  16,196  in AeroVironment on May 5, 2025 and sell it today you would earn a total of  9,811  from holding AeroVironment or generate 60.58% return on investment over 90 days.

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

AeroVironment  vs.  Sturm Ruger

AeroVironment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AeroVironment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AeroVironment showed solid returns over the last few months and may actually be approaching a breakup point.

Sturm Ruger

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sturm Ruger has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Sturm Ruger is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AeroVironment and Sturm Ruger

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

The idea behind AeroVironment and Sturm Ruger 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.