Correlation Between National Presto and AAR Corp

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

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

Diversification Opportunities for National Presto and AAR Corp

-0.19

Correlation Coefficient

National Presto  AAR Corp

Good diversification

The 3 months correlation between National and AAR is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding National Presto Industries and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and National Presto 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 National Presto Industries 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 National Presto i.e., National Presto and AAR Corp go up and down completely randomly.

Pair Corralation between National Presto and AAR Corp

Considering the 90-day investment horizon National Presto is expected to generate 46.2 times less return on investment than AAR Corp. But when comparing it to its historical volatility, National Presto Industries is 1.33 times less risky than AAR Corp. It trades about 0.02 of its potential returns per unit of risk. AAR Corp is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest  5,890  in AAR Corp on February 1, 2024 and sell it today you would earn a total of  1,024  from holding AAR Corp or generate 17.39% return on investment over 90 days.

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

National Presto Industries  vs.  AAR Corp

National Presto Indu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Presto Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, National Presto is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AAR Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward indicators, AAR Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with National Presto and AAR Corp

The main advantage of trading using opposite National Presto and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Presto 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 National Presto Industries 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.