Correlation Between Textron and Ammo

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

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

Diversification Opportunities for Textron and Ammo

0.59

Correlation Coefficient

Textron  Ammo

Very weak diversification

The 3 months correlation between Textron and Ammo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Ammo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ammo Inc 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 Ammo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ammo Inc has no effect on the direction of Textron i.e., Textron and Ammo go up and down completely randomly.

Pair Corralation between Textron and Ammo

Considering the 90-day investment horizon Textron is expected to generate 0.43 times more return on investment than Ammo. However, Textron is 2.3 times less risky than Ammo. It trades about 0.0 of its potential returns per unit of risk. Ammo Inc is currently generating about -0.04 per unit of risk. If you would invest  8,578  in Textron on September 5, 2024 and sell it today you would lose (71.00) from holding Textron or give up 0.83% of portfolio value over 90 days.

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

Textron  vs.  Ammo Inc

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 comparatively stable basic indicators, Textron is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ammo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ammo Inc 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 basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Textron and Ammo

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

The idea behind Textron and Ammo Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.