Correlation Between AMETEK, and Howmet Aerospace

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

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

Diversification Opportunities for AMETEK, and Howmet Aerospace

-0.42

Correlation Coefficient

AMETEK,  Howmet Aerospace

Very good diversification

The 3 months correlation between AMETEK, and Howmet is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding AMETEK, and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace and AMETEK, 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 AMETEK, are associated (or correlated) with Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of AMETEK, i.e., AMETEK, and Howmet Aerospace go up and down completely randomly.

Pair Corralation between AMETEK, and Howmet Aerospace

Assuming the 90 days trading horizon AMETEK, is expected to under-perform the Howmet Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, AMETEK, is 2.01 times less risky than Howmet Aerospace. The stock trades about -0.17 of its potential returns per unit of risk. The Howmet Aerospace is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  69,479  in Howmet Aerospace on December 26, 2024 and sell it today you would earn a total of  8,321  from holding Howmet Aerospace or generate 11.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

AMETEK,  vs.  Howmet Aerospace

AMETEK,

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMETEK, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Howmet Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Howmet Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMETEK, and Howmet Aerospace

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

The idea behind AMETEK, and Howmet 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.