Correlation Between Airbus Group and Bombardier

Can any of the company-specific risk be diversified away by investing in both Airbus Group and Bombardier 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 Bombardier 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 Bombardier, you can compare the effects of market volatilities on Airbus Group and Bombardier 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 Bombardier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and Bombardier.

Diversification Opportunities for Airbus Group and Bombardier

0.67

Correlation Coefficient

Airbus Group  Bombardier

Poor diversification

The 3 months correlation between Airbus and Bombardier is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Airbus Group SE and Bombardier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombardier 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 Bombardier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombardier has no effect on the direction of Airbus Group i.e., Airbus Group and Bombardier go up and down completely randomly.

Pair Corralation between Airbus Group and Bombardier

Assuming the 90 days horizon Airbus Group SE is expected to generate 5.1 times more return on investment than Bombardier. However, Airbus Group is 5.1 times more volatile than Bombardier. It trades about 0.06 of its potential returns per unit of risk. Bombardier is currently generating about -0.21 per unit of risk. If you would invest  17,311  in Airbus Group SE on February 21, 2024 and sell it today you would earn a total of  412.60  from holding Airbus Group SE or generate 2.38% return on investment over 90 days.

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

Airbus Group SE  vs.  Bombardier

Airbus Group SE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Airbus Group reported solid returns over the last few months and may actually be approaching a breakup point.

Bombardier

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bombardier are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bombardier is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Airbus Group and Bombardier

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

The idea behind Airbus Group SE and Bombardier 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.