Correlation Between Textron and HEICO

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

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

Diversification Opportunities for Textron and HEICO

0.79

Correlation Coefficient

Textron  HEICO

Poor diversification

The 3 months correlation between Textron and HEICO is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Textron and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO and Textron 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 Textron are associated (or correlated) with HEICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEICO has no effect on the direction of Textron i.e., Textron and HEICO go up and down completely randomly.

Pair Corralation between Textron and HEICO

Considering the 90-day investment horizon Textron is expected to under-perform the HEICO. But the stock apears to be less risky and, when comparing its historical volatility, Textron is 1.11 times less risky than HEICO. The stock trades about 0.0 of its potential returns per unit of risk. The HEICO is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  18,875  in HEICO on October 27, 2024 and sell it today you would earn a total of  25.00  from holding HEICO or generate 0.13% return on investment over 90 days.

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

Textron  vs.  HEICO

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

HEICO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Textron and HEICO

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

The idea behind Textron and HEICO 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.