Correlation Between Spirit Aerosystems and Huntington Ingalls

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

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

Diversification Opportunities for Spirit Aerosystems and Huntington Ingalls

-0.02

Correlation Coefficient

Spirit Aerosystems  Huntington Ingalls

Good diversification

The 3 months correlation between Spirit and Huntington is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Aerosystems Holdings and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls and Spirit Aerosystems 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 Spirit Aerosystems Holdings 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 Spirit Aerosystems i.e., Spirit Aerosystems and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Spirit Aerosystems and Huntington Ingalls

Considering the 90-day investment horizon Spirit Aerosystems is expected to generate 4.4 times less return on investment than Huntington Ingalls. But when comparing it to its historical volatility, Spirit Aerosystems Holdings is 2.67 times less risky than Huntington Ingalls. It trades about 0.04 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,695  in Huntington Ingalls Industries on December 30, 2024 and sell it today you would earn a total of  1,837  from holding Huntington Ingalls Industries or generate 9.83% return on investment over 90 days.

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

Spirit Aerosystems Holdings  vs.  Huntington Ingalls Industries

Spirit Aerosystems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spirit Aerosystems Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Spirit Aerosystems is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Huntington Ingalls

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huntington Ingalls Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Huntington Ingalls demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirit Aerosystems and Huntington Ingalls

The main advantage of trading using opposite Spirit Aerosystems and Huntington Ingalls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Aerosystems 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 Spirit Aerosystems Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.