Correlation Between Woodward and AAR Corp

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

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

Diversification Opportunities for Woodward and AAR Corp

0.93

Correlation Coefficient

Woodward  AAR Corp

Almost no diversification

The 3 months correlation between Woodward and AAR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Woodward and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Woodward 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 Woodward 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 Woodward i.e., Woodward and AAR Corp go up and down completely randomly.

Pair Corralation between Woodward and AAR Corp

Considering the 90-day investment horizon Woodward is expected to generate 0.66 times more return on investment than AAR Corp. However, Woodward is 1.51 times less risky than AAR Corp. It trades about 0.32 of its potential returns per unit of risk. AAR Corp is currently generating about 0.16 per unit of risk. If you would invest  19,582  in Woodward on May 6, 2025 and sell it today you would earn a total of  6,549  from holding Woodward or generate 33.44% return on investment over 90 days.

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

Woodward  vs.  AAR Corp

Woodward

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Woodward are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Woodward exhibited solid returns over the last few months and may actually be approaching a breakup point.

AAR Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, AAR Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woodward and AAR Corp

The main advantage of trading using opposite Woodward and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodward 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 Woodward 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 CEOs Directory module to screen CEOs from public companies around the world.