Correlation Between HEICO and Thales SA

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

By analyzing existing cross correlation between HEICO and Thales SA ADR, you can compare the effects of market volatilities on HEICO and Thales SA 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 Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEICO and Thales SA.

Diversification Opportunities for HEICO and Thales SA

-0.01

Correlation Coefficient

HEICO  Thales SA

Good diversification

The 3 months correlation between HEICO and Thales is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of HEICO i.e., HEICO and Thales SA go up and down completely randomly.

Pair Corralation between HEICO and Thales SA

Assuming the 90 days horizon HEICO is expected to generate 4.05 times less return on investment than Thales SA. But when comparing it to its historical volatility, HEICO is 1.64 times less risky than Thales SA. It trades about 0.17 of its potential returns per unit of risk. Thales SA ADR is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  3,275  in Thales SA ADR on December 4, 2024 and sell it today you would earn a total of  1,655  from holding Thales SA ADR or generate 50.53% return on investment over 90 days.

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

HEICO  vs.  Thales SA ADR

HEICO

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HEICO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Thales SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Thales SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEICO and Thales SA

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

The idea behind HEICO and Thales SA ADR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.