Correlation Between Hilton Worldwide and Heico

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

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

Diversification Opportunities for Hilton Worldwide and Heico

-0.38

Correlation Coefficient

Hilton Worldwide  Heico

Very good diversification

The 3 months correlation between Hilton and Heico is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Heico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heico and Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and Heico go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Heico

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to under-perform the Heico. But the stock apears to be less risky and, when comparing its historical volatility, Hilton Worldwide Holdings is 1.4 times less risky than Heico. The stock trades about -0.08 of its potential returns per unit of risk. The Heico is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  23,994  in Heico on December 24, 2024 and sell it today you would earn a total of  2,794  from holding Heico or generate 11.64% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Heico

Hilton Worldwide Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Worldwide Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Heico

Risk-Adjusted Performance

Modest

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 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Worldwide and Heico

The main advantage of trading using opposite Hilton Worldwide and Heico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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 Hilton Worldwide Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.