Correlation Between Howmet Aerospace and Heico

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

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

Diversification Opportunities for Howmet Aerospace and Heico

0.29

Correlation Coefficient

Howmet Aerospace  Heico

Modest diversification

The 3 months correlation between Howmet and Heico is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Heico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heico 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 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 Howmet Aerospace i.e., Howmet Aerospace and Heico go up and down completely randomly.

Pair Corralation between Howmet Aerospace and Heico

Considering the 90-day investment horizon Howmet Aerospace is expected to generate 0.99 times more return on investment than Heico. However, Howmet Aerospace is 1.01 times less risky than Heico. It trades about 0.15 of its potential returns per unit of risk. Heico is currently generating about 0.1 per unit of risk. If you would invest  11,019  in Howmet Aerospace on December 28, 2024 and sell it today you would earn a total of  2,224  from holding Howmet Aerospace or generate 20.18% return on investment over 90 days.

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

Howmet Aerospace  vs.  Heico

Howmet Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Howmet Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Heico

Risk-Adjusted Performance

OK

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 Howmet Aerospace and Heico

The main advantage of trading using opposite Howmet Aerospace and Heico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Howmet Aerospace 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 Howmet Aerospace 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.