Correlation Between Raytheon Technologies and Huntington Ingalls

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

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

Diversification Opportunities for Raytheon Technologies and Huntington Ingalls

0.23

Correlation Coefficient

Raytheon Technologies  Huntington Ingalls

Modest diversification

The 3 months correlation between Raytheon and Huntington is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls and Raytheon Technologies 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 Raytheon Technologies Corp are associated (or correlated) with Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Huntington Ingalls

Considering the 90-day investment horizon Raytheon Technologies Corp is expected to generate 0.32 times more return on investment than Huntington Ingalls. However, Raytheon Technologies Corp is 3.15 times less risky than Huntington Ingalls. It trades about 0.01 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.12 per unit of risk. If you would invest  12,035  in Raytheon Technologies Corp on August 31, 2024 and sell it today you would earn a total of  44.50  from holding Raytheon Technologies Corp or generate 0.37% return on investment over 90 days.

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

Raytheon Technologies Corp  vs.  Huntington Ingalls Industries

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Raytheon Technologies and Huntington Ingalls

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

The idea behind Raytheon Technologies Corp and Huntington Ingalls Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.