Correlation Between Raytheon Technologies and Indivior PLC
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies and Indivior PLC 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 Indivior PLC 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 Indivior PLC, you can compare the effects of market volatilities on Raytheon Technologies and Indivior PLC 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 Indivior PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Indivior PLC.
Diversification Opportunities for Raytheon Technologies and Indivior PLC
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Raytheon and Indivior is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Indivior PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indivior PLC 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 Indivior PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indivior PLC has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Indivior PLC go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Indivior PLC
Assuming the 90 days trading horizon Raytheon Technologies Corp is expected to generate 0.36 times more return on investment than Indivior PLC. However, Raytheon Technologies Corp is 2.78 times less risky than Indivior PLC. It trades about 0.51 of its potential returns per unit of risk. Indivior PLC is currently generating about -0.02 per unit of risk. If you would invest 11,550 in Raytheon Technologies Corp on October 29, 2024 and sell it today you would earn a total of 1,052 from holding Raytheon Technologies Corp or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Raytheon Technologies Corp vs. Indivior PLC
Performance |
| Timeline |
| Raytheon Technologies |
| Indivior PLC |
Raytheon Technologies and Indivior PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Indivior PLC
The main advantage of trading using opposite Raytheon Technologies and Indivior PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies position performs unexpectedly, Indivior PLC 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 Indivior PLC will offset losses from the drop in Indivior PLC's long position.The idea behind Raytheon Technologies Corp and Indivior PLC 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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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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