Correlation Between Heico and Raytheon Technologies

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

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

Diversification Opportunities for Heico and Raytheon Technologies

-0.04

Correlation Coefficient

Heico  Raytheon Technologies

Good diversification

The 3 months correlation between Heico and Raytheon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Heico i.e., Heico and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Heico and Raytheon Technologies

Considering the 90-day investment horizon Heico is expected to generate 1.2 times more return on investment than Raytheon Technologies. However, Heico is 1.2 times more volatile than Raytheon Technologies Corp. It trades about 0.3 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.11 per unit of risk. If you would invest  24,586  in Heico on September 2, 2024 and sell it today you would earn a total of  2,751  from holding Heico or generate 11.19% return on investment over 90 days.

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

Heico  vs.  Raytheon Technologies Corp

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 fairly weak technical and fundamental indicators, Heico may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Raytheon Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heico and Raytheon Technologies

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

The idea behind Heico and Raytheon Technologies Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.