Correlation Between Intel and NORTHROP

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

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

Diversification Opportunities for Intel and NORTHROP

-0.47

Correlation Coefficient

Intel  NORTHROP

Very good diversification

The 3 months correlation between Intel and NORTHROP is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Intel and NORTHROP GRUMMAN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHROP GRUMMAN P and Intel 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 Intel are associated (or correlated) with NORTHROP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHROP GRUMMAN P has no effect on the direction of Intel i.e., Intel and NORTHROP go up and down completely randomly.

Pair Corralation between Intel and NORTHROP

Given the investment horizon of 90 days Intel is expected to generate 4.76 times more return on investment than NORTHROP. However, Intel is 4.76 times more volatile than NORTHROP GRUMMAN P. It trades about 0.04 of its potential returns per unit of risk. NORTHROP GRUMMAN P is currently generating about -0.06 per unit of risk. If you would invest  1,936  in Intel on September 12, 2024 and sell it today you would earn a total of  80.00  from holding Intel or generate 4.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Intel  vs.  NORTHROP GRUMMAN P

Intel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Intel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NORTHROP GRUMMAN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHROP GRUMMAN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORTHROP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intel and NORTHROP

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

The idea behind Intel and NORTHROP GRUMMAN P 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 CEOs Directory module to screen CEOs from public companies around the world.