Correlation Between HEICO and Astronics

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

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

Diversification Opportunities for HEICO and Astronics

-0.28

Correlation Coefficient

HEICO  Astronics

Very good diversification

The 3 months correlation between HEICO and Astronics is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and Astronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astronics and HEICO 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 HEICO are associated (or correlated) with Astronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astronics has no effect on the direction of HEICO i.e., HEICO and Astronics go up and down completely randomly.

Pair Corralation between HEICO and Astronics

Assuming the 90 days horizon HEICO is expected to generate 0.4 times more return on investment than Astronics. However, HEICO is 2.52 times less risky than Astronics. It trades about 0.01 of its potential returns per unit of risk. Astronics is currently generating about -0.04 per unit of risk. If you would invest  19,848  in HEICO on September 11, 2024 and sell it today you would lose (24.00) from holding HEICO or give up 0.12% of portfolio value over 90 days.

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

HEICO  vs.  Astronics

HEICO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Astronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with HEICO and Astronics

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

The idea behind HEICO and Astronics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.