Correlation Between Howmet Aerospace and Otis Worldwide

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

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

Diversification Opportunities for Howmet Aerospace and Otis Worldwide

0.0

Correlation Coefficient

Howmet Aerospace  Otis Worldwide

Pay attention - limited upside

The 3 months correlation between Howmet and Otis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Otis Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide and Howmet Aerospace 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 Howmet Aerospace are associated (or correlated) with Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and Otis Worldwide go up and down completely randomly.

Pair Corralation between Howmet Aerospace and Otis Worldwide

If you would invest  57,598  in Howmet Aerospace on October 25, 2024 and sell it today you would earn a total of  17,818  from holding Howmet Aerospace or generate 30.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.72%
Values	Daily Returns

Howmet Aerospace  vs.  Otis Worldwide

Howmet Aerospace

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Howmet Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Otis Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otis Worldwide has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Otis Worldwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Howmet Aerospace and Otis Worldwide

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

The idea behind Howmet Aerospace and Otis Worldwide 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.