Correlation Between Huntington Ingalls and Textron

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

Diversification Opportunities for Huntington Ingalls and Textron

0.48

Correlation Coefficient

Huntington Ingalls  Textron

Very weak diversification

The 3 months correlation between Huntington and Textron is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Ingalls Industries and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 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 Huntington Ingalls i.e., Huntington Ingalls and Textron go up and down completely randomly.

Pair Corralation between Huntington Ingalls and Textron

Considering the 90-day investment horizon Huntington Ingalls Industries is expected to generate 2.32 times more return on investment than Textron. However, Huntington Ingalls is 2.32 times more volatile than Textron. It trades about 0.06 of its potential returns per unit of risk. Textron is currently generating about -0.04 per unit of risk. If you would invest  18,695  in Huntington Ingalls Industries on December 30, 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Huntington Ingalls Industries  vs.  Textron

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 uncertain forward indicators, Huntington Ingalls demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Textron

Risk-Adjusted Performance

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 comparatively stable basic indicators, Textron is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Huntington Ingalls and Textron

The main advantage of trading using opposite Huntington Ingalls and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntington Ingalls 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 Huntington Ingalls Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..