Correlation Between Raytheon Technologies and Axon Enterprise

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

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

Diversification Opportunities for Raytheon Technologies and Axon Enterprise

0.04

Correlation Coefficient

Raytheon Technologies  Axon Enterprise

Significant diversification

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

Pair Corralation between Raytheon Technologies and Axon Enterprise

Considering the 90-day investment horizon Raytheon Technologies is expected to generate 39.11 times less return on investment than Axon Enterprise. But when comparing it to its historical volatility, Raytheon Technologies Corp is 3.33 times less risky than Axon Enterprise. It trades about 0.02 of its potential returns per unit of risk. Axon Enterprise is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  35,516  in Axon Enterprise on September 2, 2024 and sell it today you would earn a total of  29,180  from holding Axon Enterprise or generate 82.16% return on investment over 90 days.

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

Raytheon Technologies Corp  vs.  Axon Enterprise

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.

Axon Enterprise

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Axon Enterprise displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raytheon Technologies and Axon Enterprise

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

The idea behind Raytheon Technologies Corp and Axon Enterprise 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.