Correlation Between Howmet Aerospace and Astronics

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

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

Diversification Opportunities for Howmet Aerospace and Astronics

-0.75

Correlation Coefficient

Howmet Aerospace  Astronics

Pay attention - limited upside

The 3 months correlation between Howmet and Astronics is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Astronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astronics and Howmet Aerospace 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 Howmet Aerospace are associated (or correlated) with Astronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astronics has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and Astronics go up and down completely randomly.

Pair Corralation between Howmet Aerospace and Astronics

Considering the 90-day investment horizon Howmet Aerospace is expected to generate 0.57 times more return on investment than Astronics. However, Howmet Aerospace is 1.75 times less risky than Astronics. It trades about -0.15 of its potential returns per unit of risk. Astronics is currently generating about -0.11 per unit of risk. If you would invest  11,698  in Howmet Aerospace on September 22, 2024 and sell it today you would lose (615.00) from holding Howmet Aerospace or give up 5.26% of portfolio value over 90 days.

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

Howmet Aerospace  vs.  Astronics

Howmet Aerospace

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Howmet Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Astronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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 Howmet Aerospace and Astronics

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

The idea behind Howmet Aerospace and Astronics 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.