Correlation Between Planet Labs and Textron

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

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

Diversification Opportunities for Planet Labs and Textron

-0.57

Correlation Coefficient

Planet Labs  Textron

Excellent diversification

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

Pair Corralation between Planet Labs and Textron

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to generate 2.82 times more return on investment than Textron. However, Planet Labs is 2.82 times more volatile than Textron. It trades about 0.02 of its potential returns per unit of risk. Textron is currently generating about 0.02 per unit of risk. If you would invest  489.00  in Planet Labs PBC on September 28, 2024 and sell it today you would lose (37.00) from holding Planet Labs PBC or give up 7.57% of portfolio value over 90 days.

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

Planet Labs PBC  vs.  Textron

Planet Labs PBC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Labs PBC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Planet Labs disclosed solid returns over the last few months and may actually be approaching a breakup point.

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Planet Labs and Textron

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

The idea behind Planet Labs PBC and Textron 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.