Correlation Between Communication Services and Defense And

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

By analyzing existing cross correlation between Communication Services Select and Defense And Aerospace, you can compare the effects of market volatilities on Communication Services and Defense And 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 Communication Services with a short position of Defense And. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communication Services and Defense And.

Diversification Opportunities for Communication Services and Defense And

0.58

Correlation Coefficient

Communication Services  Defense And

Very weak diversification

The 3 months correlation between Communication and Defense is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Communication Services Select and Defense And Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense And Aerospace and Communication Services 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 Communication Services Select are associated (or correlated) with Defense And. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense And Aerospace has no effect on the direction of Communication Services i.e., Communication Services and Defense And go up and down completely randomly.

Pair Corralation between Communication Services and Defense And

Considering the 90-day investment horizon Communication Services is expected to generate 1.71 times less return on investment than Defense And. But when comparing it to its historical volatility, Communication Services Select is 1.27 times less risky than Defense And. It trades about 0.05 of its potential returns per unit of risk. Defense And Aerospace is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,458  in Defense And Aerospace on August 12, 2025 and sell it today you would earn a total of  87.00  from holding Defense And Aerospace or generate 3.54% return on investment over 90 days.

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

Communication Services Select  vs.  Defense And Aerospace

Communication Services

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Communication Services Select are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Communication Services is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Defense And Aerospace

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Defense And Aerospace are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Defense And is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Communication Services and Defense And

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

The idea behind Communication Services Select and Defense And Aerospace 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.