Correlation Between Howmet Aerospace and Moog

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

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

Diversification Opportunities for Howmet Aerospace and Moog

0.9

Correlation Coefficient

Howmet Aerospace  Moog

Almost no diversification

The 3 months correlation between Howmet and Moog is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Moog Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moog Inc 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 Moog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moog Inc has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and Moog go up and down completely randomly.

Pair Corralation between Howmet Aerospace and Moog

Considering the 90-day investment horizon Howmet Aerospace is expected to generate 0.98 times more return on investment than Moog. However, Howmet Aerospace is 1.02 times less risky than Moog. It trades about 0.19 of its potential returns per unit of risk. Moog Inc is currently generating about 0.14 per unit of risk. If you would invest  9,295  in Howmet Aerospace on September 3, 2024 and sell it today you would earn a total of  2,474  from holding Howmet Aerospace or generate 26.62% return on investment over 90 days.

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

Howmet Aerospace  vs.  Moog Inc

Howmet Aerospace

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 14 (%) 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.

Moog Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moog Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Moog sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Howmet Aerospace and Moog

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

The idea behind Howmet Aerospace and Moog Inc 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.