Correlation Between Textron and Moog

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

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

Diversification Opportunities for Textron and Moog

-0.3

Correlation Coefficient

Textron  Moog

Very good diversification

The 3 months correlation between Textron and Moog is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Moog Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moog Inc and Textron 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 Textron are associated (or correlated) with Moog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moog Inc has no effect on the direction of Textron i.e., Textron and Moog go up and down completely randomly.

Pair Corralation between Textron and Moog

Considering the 90-day investment horizon Textron is expected to generate 8.59 times less return on investment than Moog. But when comparing it to its historical volatility, Textron is 1.69 times less risky than Moog. It trades about 0.03 of its potential returns per unit of risk. Moog Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,845  in Moog Inc on September 12, 2024 and sell it today you would earn a total of  12,746  from holding Moog Inc or generate 144.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.93%
Values	Daily Returns

Textron  vs.  Moog Inc

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

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

Moog Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moog Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Moog sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Textron and Moog

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

The idea behind Textron and Moog Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .