Correlation Between HEICO and Curtiss Wright

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

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

Diversification Opportunities for HEICO and Curtiss Wright

0.48

Correlation Coefficient

HEICO  Curtiss Wright

Very weak diversification

The 3 months correlation between HEICO and Curtiss is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and Curtiss Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curtiss Wright and HEICO 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 HEICO are associated (or correlated) with Curtiss Wright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curtiss Wright has no effect on the direction of HEICO i.e., HEICO and Curtiss Wright go up and down completely randomly.

Pair Corralation between HEICO and Curtiss Wright

Assuming the 90 days horizon HEICO is expected to generate 1.6 times less return on investment than Curtiss Wright. But when comparing it to its historical volatility, HEICO is 1.32 times less risky than Curtiss Wright. It trades about 0.11 of its potential returns per unit of risk. Curtiss Wright is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  28,105  in Curtiss Wright on August 31, 2024 and sell it today you would earn a total of  9,258  from holding Curtiss Wright or generate 32.94% return on investment over 90 days.

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

HEICO  vs.  Curtiss Wright

HEICO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEICO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, HEICO may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Curtiss Wright

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Wright are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Curtiss Wright showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEICO and Curtiss Wright

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

The idea behind HEICO and Curtiss Wright 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.