Correlation Between Heico and Lilium NV

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

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

Diversification Opportunities for Heico and Lilium NV

-0.18

Correlation Coefficient

Heico  Lilium NV

Good diversification

The 3 months correlation between Heico and Lilium is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Lilium NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lilium NV 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 Lilium NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lilium NV has no effect on the direction of Heico i.e., Heico and Lilium NV go up and down completely randomly.

Pair Corralation between Heico and Lilium NV

Considering the 90-day investment horizon Heico is expected to generate 0.07 times more return on investment than Lilium NV. However, Heico is 14.62 times less risky than Lilium NV. It trades about 0.12 of its potential returns per unit of risk. Lilium NV is currently generating about -0.04 per unit of risk. If you would invest  24,774  in Heico on September 2, 2024 and sell it today you would earn a total of  2,563  from holding Heico or generate 10.35% return on investment over 90 days.

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

Heico  vs.  Lilium NV

Heico

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heico are ranked lower than 9 (%) 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.

Lilium NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lilium NV 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 essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Heico and Lilium NV

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

The idea behind Heico and Lilium NV 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.