Correlation Between Northrop Grumman and Ehang Holdings
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Ehang Holdings 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 Northrop Grumman and Ehang Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Ehang Holdings, you can compare the effects of market volatilities on Northrop Grumman and Ehang Holdings 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 Northrop Grumman with a short position of Ehang Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Ehang Holdings.
Diversification Opportunities for Northrop Grumman and Ehang Holdings
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northrop and Ehang is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Ehang Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ehang Holdings and Northrop Grumman 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 Northrop Grumman are associated (or correlated) with Ehang Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ehang Holdings has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Ehang Holdings go up and down completely randomly.
Pair Corralation between Northrop Grumman and Ehang Holdings
Considering the 90-day investment horizon Northrop Grumman is expected to generate 14.44 times less return on investment than Ehang Holdings. But when comparing it to its historical volatility, Northrop Grumman is 4.05 times less risky than Ehang Holdings. It trades about 0.02 of its potential returns per unit of risk. Ehang Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 841.00 in Ehang Holdings on January 19, 2024 and sell it today you would earn a total of 988.00 from holding Ehang Holdings or generate 117.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Northrop Grumman vs. Ehang Holdings
Performance |
Timeline |
Northrop Grumman |
Ehang Holdings |
Northrop Grumman and Ehang Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northrop Grumman and Ehang Holdings
The main advantage of trading using opposite Northrop Grumman and Ehang Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Ehang Holdings 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 Ehang Holdings will offset losses from the drop in Ehang Holdings' long position.Northrop Grumman vs. Curtiss Wright | Northrop Grumman vs. Hexcel | Northrop Grumman vs. Kaman | Northrop Grumman vs. Ducommun Incorporated |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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