Correlation Between Bread Financial and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Bread Financial 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 Bread Financial and Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Raytheon Technologies, you can compare the effects of market volatilities on Bread Financial 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 Bread Financial with a short position of Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Raytheon Technologies.
Diversification Opportunities for Bread Financial and Raytheon Technologies
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bread and Raytheon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Bread Financial 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Bread Financial and Raytheon Technologies
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.95 times more return on investment than Raytheon Technologies. However, Bread Financial is 1.95 times more volatile than Raytheon Technologies. It trades about 0.05 of its potential returns per unit of risk. Raytheon Technologies is currently generating about 0.05 per unit of risk. If you would invest 5,005 in Bread Financial Holdings on September 3, 2024 and sell it today you would earn a total of 3,881 from holding Bread Financial Holdings or generate 77.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.76% |
| Values | Daily Returns |
Bread Financial Holdings vs. Raytheon Technologies
Performance |
| Timeline |
| Bread Financial Holdings |
| Raytheon Technologies |
Bread Financial and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Raytheon Technologies
The main advantage of trading using opposite Bread Financial and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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.| Bread Financial vs. Visa Inc | Bread Financial vs. Capital One Financial | Bread Financial vs. Credit Acceptance |
| Raytheon Technologies vs. Lockheed Martin | Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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