Correlation Between HEICO and Textron

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

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

Diversification Opportunities for HEICO and Textron

0.76

Correlation Coefficient

HEICO  Textron

Poor diversification

The 3 months correlation between HEICO and Textron is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of HEICO i.e., HEICO and Textron go up and down completely randomly.

Pair Corralation between HEICO and Textron

Assuming the 90 days horizon HEICO is expected to generate 1.08 times more return on investment than Textron. However, HEICO is 1.08 times more volatile than Textron. It trades about -0.13 of its potential returns per unit of risk. Textron is currently generating about -0.14 per unit of risk. If you would invest  20,709  in HEICO on October 12, 2024 and sell it today you would lose (2,822) from holding HEICO or give up 13.63% of portfolio value over 90 days.

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

HEICO  vs.  Textron

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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HEICO and Textron

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

The idea behind HEICO and Textron 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.