Correlation Between Qinetiq Group and HEICO

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

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

Diversification Opportunities for Qinetiq Group and HEICO

0.47

Correlation Coefficient

Qinetiq Group  HEICO

Very weak diversification

The 3 months correlation between Qinetiq and HEICO is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Qinetiq Group PLC and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO and Qinetiq Group 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 Qinetiq Group PLC 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 Qinetiq Group i.e., Qinetiq Group and HEICO go up and down completely randomly.

Pair Corralation between Qinetiq Group and HEICO

Assuming the 90 days horizon Qinetiq Group is expected to generate 1.83 times less return on investment than HEICO. In addition to that, Qinetiq Group is 2.18 times more volatile than HEICO. It trades about 0.02 of its total potential returns per unit of risk. HEICO is currently generating about 0.1 per unit of volatility. If you would invest  18,687  in HEICO on December 29, 2024 and sell it today you would earn a total of  2,262  from holding HEICO or generate 12.1% return on investment over 90 days.

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

Qinetiq Group PLC  vs.  HEICO

Qinetiq Group PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qinetiq Group PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Qinetiq Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 somewhat conflicting basic indicators, HEICO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qinetiq Group and HEICO

The main advantage of trading using opposite Qinetiq Group and HEICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qinetiq Group 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 Qinetiq Group PLC 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.