Correlation Between Howmet Aerospace and Huntington Ingalls

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

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

Diversification Opportunities for Howmet Aerospace and Huntington Ingalls

-0.78

Correlation Coefficient

Howmet Aerospace  Huntington Ingalls

Pay attention - limited upside

The 3 months correlation between Howmet and Huntington is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls and Howmet Aerospace 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 Howmet Aerospace are associated (or correlated) with Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Howmet Aerospace and Huntington Ingalls

Considering the 90-day investment horizon Howmet Aerospace is expected to generate 0.58 times more return on investment than Huntington Ingalls. However, Howmet Aerospace is 1.73 times less risky than Huntington Ingalls. It trades about 0.18 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.12 per unit of risk. If you would invest  9,295  in Howmet Aerospace on August 31, 2024 and sell it today you would earn a total of  2,375  from holding Howmet Aerospace or generate 25.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Howmet Aerospace  vs.  Huntington Ingalls Industries

Howmet Aerospace

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Howmet Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Howmet Aerospace and Huntington Ingalls

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

The idea behind Howmet Aerospace and Huntington Ingalls Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.