Correlation Between HEICO and MTU Aero
Can any of the company-specific risk be diversified away by investing in both HEICO and MTU Aero 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 MTU Aero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HEICO and MTU Aero Engines, you can compare the effects of market volatilities on HEICO and MTU Aero 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 MTU Aero. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEICO and MTU Aero.
Diversification Opportunities for HEICO and MTU Aero
Significant diversification
The 3 months correlation between HEICO and MTU is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and MTU Aero Engines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTU Aero Engines 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 MTU Aero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTU Aero Engines has no effect on the direction of HEICO i.e., HEICO and MTU Aero go up and down completely randomly.
Pair Corralation between HEICO and MTU Aero
Assuming the 90 days horizon HEICO is expected to generate 2.94 times less return on investment than MTU Aero. But when comparing it to its historical volatility, HEICO is 1.66 times less risky than MTU Aero. It trades about 0.04 of its potential returns per unit of risk. MTU Aero Engines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 28,700 in MTU Aero Engines on December 4, 2024 and sell it today you would earn a total of 7,701 from holding MTU Aero Engines or generate 26.83% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.19% |
Values | Daily Returns |
HEICO vs. MTU Aero Engines
Performance |
Timeline |
HEICO |
MTU Aero Engines |
HEICO and MTU Aero Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HEICO and MTU Aero
The main advantage of trading using opposite HEICO and MTU Aero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEICO position performs unexpectedly, MTU Aero 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 MTU Aero will offset losses from the drop in MTU Aero's long position.HEICO vs. Vertical Aerospace | HEICO vs. Rolls Royce Holdings plc | HEICO vs. Embraer SA ADR | HEICO vs. Rocket Lab USA |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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