Correlation Between Heico and KWESST Micro

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

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

Diversification Opportunities for Heico and KWESST Micro

-0.38

Correlation Coefficient

Heico  KWESST Micro

Very good diversification

The 3 months correlation between Heico and KWESST is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Heico and KWESST Micro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST Micro Systems 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 KWESST Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST Micro Systems has no effect on the direction of Heico i.e., Heico and KWESST Micro go up and down completely randomly.

Pair Corralation between Heico and KWESST Micro

Considering the 90-day investment horizon Heico is expected to generate 0.08 times more return on investment than KWESST Micro. However, Heico is 11.99 times less risky than KWESST Micro. It trades about 0.1 of its potential returns per unit of risk. KWESST Micro Systems is currently generating about 0.01 per unit of risk. If you would invest  24,774  in Heico on September 3, 2024 and sell it today you would earn a total of  2,094  from holding Heico or generate 8.45% return on investment over 90 days.

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

Heico  vs.  KWESST Micro Systems

Heico

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heico are ranked lower than 7 (%) 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 January 2025.

KWESST Micro Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KWESST Micro Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, KWESST Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heico and KWESST Micro

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

The idea behind Heico and KWESST Micro Systems 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.