Correlation Between Patria Investments and Raytheon Technologies

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

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

Diversification Opportunities for Patria Investments and Raytheon Technologies

0.57

Correlation Coefficient

Patria Investments  Raytheon Technologies

Very weak diversification

The 3 months correlation between Patria and Raytheon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments Limited and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Patria Investments 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 Patria Investments Limited are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Patria Investments i.e., Patria Investments and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Patria Investments and Raytheon Technologies

Assuming the 90 days trading horizon Patria Investments is expected to generate 8.47 times less return on investment than Raytheon Technologies. But when comparing it to its historical volatility, Patria Investments Limited is 1.02 times less risky than Raytheon Technologies. It trades about 0.02 of its potential returns per unit of risk. Raytheon Technologies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,834  in Raytheon Technologies on October 9, 2024 and sell it today you would earn a total of  4,784  from holding Raytheon Technologies or generate 70.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.75%
Values	Daily Returns

Patria Investments Limited  vs.  Raytheon Technologies

Patria Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Raytheon Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Patria Investments and Raytheon Technologies

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

The idea behind Patria Investments Limited and Raytheon Technologies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.