Correlation Between V2X and New Horizon

Can any of the company-specific risk be diversified away by investing in both V2X 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 V2X and New Horizon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between V2X Inc and New Horizon Aircraft, you can compare the effects of market volatilities on V2X 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 V2X with a short position of New Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and New Horizon.

Diversification Opportunities for V2X and New Horizon

-0.19

Correlation Coefficient

V2X  New Horizon

Good diversification

The 3 months correlation between V2X and New is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc 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 V2X 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 V2X Inc 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 V2X i.e., V2X and New Horizon go up and down completely randomly.

Pair Corralation between V2X and New Horizon

Considering the 90-day investment horizon V2X Inc is expected to generate 0.24 times more return on investment than New Horizon. However, V2X Inc is 4.09 times less risky than New Horizon. It trades about 0.02 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about -0.01 per unit of risk. If you would invest  4,500  in V2X Inc on December 2, 2024 and sell it today you would earn a total of  192.00  from holding V2X Inc or generate 4.27% return on investment over 90 days.

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

V2X Inc  vs.  New Horizon Aircraft

V2X Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days V2X Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

New Horizon Aircraft

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Horizon Aircraft has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with V2X and New Horizon

The main advantage of trading using opposite V2X and New Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X 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 V2X Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.