Correlation Between HEICO and Qinetiq Group

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

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

Diversification Opportunities for HEICO and Qinetiq Group

-0.7

Correlation Coefficient

HEICO  Qinetiq Group

Excellent diversification

The 3 months correlation between HEICO and Qinetiq is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and Qinetiq Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinetiq Group PLC 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 Qinetiq Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinetiq Group PLC has no effect on the direction of HEICO i.e., HEICO and Qinetiq Group go up and down completely randomly.

Pair Corralation between HEICO and Qinetiq Group

Assuming the 90 days horizon HEICO is expected to generate 0.59 times more return on investment than Qinetiq Group. However, HEICO is 1.69 times less risky than Qinetiq Group. It trades about 0.11 of its potential returns per unit of risk. Qinetiq Group PLC is currently generating about -0.1 per unit of risk. If you would invest  19,278  in HEICO on September 3, 2024 and sell it today you would earn a total of  1,835  from holding HEICO or generate 9.52% return on investment over 90 days.

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

HEICO  vs.  Qinetiq Group PLC

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 January 2025.

Qinetiq Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HEICO and Qinetiq Group

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

The idea behind HEICO and Qinetiq Group PLC 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.