Correlation Between Raytheon Technologies and Virgin Galactic

Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies and Virgin Galactic 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 Virgin Galactic 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 Virgin Galactic Holdings, you can compare the effects of market volatilities on Raytheon Technologies and Virgin Galactic 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 Virgin Galactic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Virgin Galactic.

Diversification Opportunities for Raytheon Technologies and Virgin Galactic

-0.85

Correlation Coefficient

Raytheon Technologies  Virgin Galactic

Pay attention - limited upside

The 3 months correlation between Raytheon and Virgin is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Virgin Galactic Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Galactic Holdings 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 Virgin Galactic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Galactic Holdings has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Virgin Galactic go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Virgin Galactic

Considering the 90-day investment horizon Raytheon Technologies Corp is expected to generate 0.29 times more return on investment than Virgin Galactic. However, Raytheon Technologies Corp is 3.43 times less risky than Virgin Galactic. It trades about 0.17 of its potential returns per unit of risk. Virgin Galactic Holdings is currently generating about -0.18 per unit of risk. If you would invest  11,464  in Raytheon Technologies Corp on December 29, 2024 and sell it today you would earn a total of  1,708  from holding Raytheon Technologies Corp or generate 14.9% return on investment over 90 days.

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

Raytheon Technologies Corp  vs.  Virgin Galactic Holdings

Raytheon Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Raytheon Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Virgin Galactic Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virgin Galactic Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Raytheon Technologies and Virgin Galactic

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

The idea behind Raytheon Technologies Corp and Virgin Galactic Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.