Correlation Between Transdigm Group and Loar Holdings

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

Diversification Opportunities for Transdigm Group and Loar Holdings

-0.34

Correlation Coefficient

Transdigm Group  Loar Holdings

Very good diversification

The 3 months correlation between Transdigm and Loar is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar Holdings 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 Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of Transdigm Group i.e., Transdigm Group and Loar Holdings go up and down completely randomly.

Pair Corralation between Transdigm Group and Loar Holdings

Considering the 90-day investment horizon Transdigm Group Incorporated is expected to generate 0.58 times more return on investment than Loar Holdings. However, Transdigm Group Incorporated is 1.71 times less risky than Loar Holdings. It trades about 0.06 of its potential returns per unit of risk. Loar Holdings is currently generating about -0.18 per unit of risk. If you would invest  130,781  in Transdigm Group Incorporated on December 4, 2024 and sell it today you would earn a total of  6,079  from holding Transdigm Group Incorporated or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Transdigm Group Incorporated  vs.  Loar Holdings

Transdigm Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transdigm Group Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Loar Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Transdigm Group and Loar Holdings

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

The idea behind Transdigm Group Incorporated and Loar 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.