Correlation Between Huntington Ingalls and Optex Systems

Can any of the company-specific risk be diversified away by investing in both Huntington Ingalls and Optex Systems 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 Optex Systems 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 Optex Systems Holdings,, you can compare the effects of market volatilities on Huntington Ingalls and Optex Systems 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 Optex Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huntington Ingalls and Optex Systems.

Diversification Opportunities for Huntington Ingalls and Optex Systems

-0.04

Correlation Coefficient

Huntington Ingalls  Optex Systems

Good diversification

The 3 months correlation between Huntington and Optex is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Ingalls Industries and Optex Systems Holdings, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optex Systems Holdings, 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 Optex Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optex Systems Holdings, has no effect on the direction of Huntington Ingalls i.e., Huntington Ingalls and Optex Systems go up and down completely randomly.

Pair Corralation between Huntington Ingalls and Optex Systems

Considering the 90-day investment horizon Huntington Ingalls Industries is expected to generate 1.49 times more return on investment than Optex Systems. However, Huntington Ingalls is 1.49 times more volatile than Optex Systems Holdings,. It trades about 0.06 of its potential returns per unit of risk. Optex Systems Holdings, is currently generating about -0.1 per unit of risk. If you would invest  18,695  in Huntington Ingalls Industries on December 29, 2024 and sell it today you would earn a total of  1,837  from holding Huntington Ingalls Industries or generate 9.83% return on investment over 90 days.

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

Huntington Ingalls Industries  vs.  Optex Systems Holdings,

Huntington Ingalls

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huntington Ingalls Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Huntington Ingalls demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Optex Systems Holdings,

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Huntington Ingalls and Optex Systems

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

The idea behind Huntington Ingalls Industries and Optex Systems Holdings, 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.