Correlation Between Huntington Ingalls and HEICO

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

By analyzing existing cross correlation between Huntington Ingalls Industries and HEICO, you can compare the effects of market volatilities on Huntington Ingalls and HEICO 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 Huntington Ingalls with a short position of HEICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huntington Ingalls and HEICO.

Diversification Opportunities for Huntington Ingalls and HEICO

-0.41

Correlation Coefficient

Huntington Ingalls  HEICO

Very good diversification

The 3 months correlation between Huntington and HEICO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Ingalls Industries and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO and Huntington Ingalls 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 Huntington Ingalls Industries are associated (or correlated) with HEICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEICO has no effect on the direction of Huntington Ingalls i.e., Huntington Ingalls and HEICO go up and down completely randomly.

Pair Corralation between Huntington Ingalls and HEICO

Considering the 90-day investment horizon Huntington Ingalls Industries is expected to under-perform the HEICO. In addition to that, Huntington Ingalls is 2.75 times more volatile than HEICO. It trades about -0.12 of its total potential returns per unit of risk. HEICO is currently generating about 0.11 per unit of volatility. If you would invest  19,278  in HEICO on September 2, 2024 and sell it today you would earn a total of  1,835  from holding HEICO or generate 9.52% return on investment over 90 days.

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

Huntington Ingalls Industries  vs.  HEICO

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 somewhat conflicting basic indicators, HEICO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Huntington Ingalls and HEICO

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

The idea behind Huntington Ingalls Industries and HEICO 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.