Correlation Between Vertical Aerospace and Heico

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

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

Diversification Opportunities for Vertical Aerospace and Heico

-0.44

Correlation Coefficient

Vertical Aerospace  Heico

Very good diversification

The 3 months correlation between Vertical and Heico is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Heico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heico and Vertical 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 Vertical Aerospace are associated (or correlated) with Heico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heico has no effect on the direction of Vertical Aerospace i.e., Vertical Aerospace and Heico go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Heico

Given the investment horizon of 90 days Vertical Aerospace is expected to under-perform the Heico. In addition to that, Vertical Aerospace is 3.88 times more volatile than Heico. It trades about -0.19 of its total potential returns per unit of risk. Heico is currently generating about 0.09 per unit of volatility. If you would invest  23,959  in Heico on December 29, 2024 and sell it today you would earn a total of  2,647  from holding Heico or generate 11.05% return on investment over 90 days.

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

Vertical Aerospace  vs.  Heico

Vertical Aerospace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vertical Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Heico

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heico are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Heico may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vertical Aerospace and Heico

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

The idea behind Vertical Aerospace and Heico 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.