Correlation Between Transdigm Group and New Horizon

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

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

Diversification Opportunities for Transdigm Group and New Horizon

-0.49

Correlation Coefficient

Transdigm Group  New Horizon

Very good diversification

The 3 months correlation between Transdigm and New is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft and Transdigm 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 Transdigm Group Incorporated are associated (or correlated) with New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Transdigm Group i.e., Transdigm Group and New Horizon go up and down completely randomly.

Pair Corralation between Transdigm Group and New Horizon

Considering the 90-day investment horizon Transdigm Group Incorporated is expected to under-perform the New Horizon. But the stock apears to be less risky and, when comparing its historical volatility, Transdigm Group Incorporated is 7.58 times less risky than New Horizon. The stock trades about -0.02 of its potential returns per unit of risk. The New Horizon Aircraft is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  36.00  in New Horizon Aircraft on October 21, 2024 and sell it today you would earn a total of  54.00  from holding New Horizon Aircraft or generate 150.0% return on investment over 90 days.

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

Transdigm Group Incorporated  vs.  New Horizon Aircraft

Transdigm Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transdigm Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Transdigm Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

New Horizon Aircraft

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transdigm Group and New Horizon

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

The idea behind Transdigm Group Incorporated and New Horizon Aircraft 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.