Correlation Between Sabien Technology and Raytheon Technologies

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

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

Diversification Opportunities for Sabien Technology and Raytheon Technologies

0.66

Correlation Coefficient

Sabien Technology  Raytheon Technologies

Poor diversification

The 3 months correlation between Sabien and Raytheon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sabien Technology Group and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Sabien Technology 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 Sabien Technology Group 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 Sabien Technology i.e., Sabien Technology and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Sabien Technology and Raytheon Technologies

Assuming the 90 days trading horizon Sabien Technology Group is expected to generate 3.51 times more return on investment than Raytheon Technologies. However, Sabien Technology is 3.51 times more volatile than Raytheon Technologies Corp. It trades about 0.15 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about -0.03 per unit of risk. If you would invest  825.00  in Sabien Technology Group on September 2, 2024 and sell it today you would earn a total of  350.00  from holding Sabien Technology Group or generate 42.42% return on investment over 90 days.

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

Sabien Technology Group  vs.  Raytheon Technologies Corp

Sabien Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabien Technology Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Sabien Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sabien Technology and Raytheon Technologies

The main advantage of trading using opposite Sabien Technology and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabien Technology 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 Sabien Technology Group 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.