Correlation Between AeroVironment and Textron
Can any of the company-specific risk be diversified away by investing in both AeroVironment and Textron 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 AeroVironment and Textron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AeroVironment and Textron, you can compare the effects of market volatilities on AeroVironment and Textron 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 AeroVironment with a short position of Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of AeroVironment and Textron.
Diversification Opportunities for AeroVironment and Textron
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between AeroVironment and Textron is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron and AeroVironment 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 AeroVironment are associated (or correlated) with Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of AeroVironment i.e., AeroVironment and Textron go up and down completely randomly.
Pair Corralation between AeroVironment and Textron
Given the investment horizon of 90 days AeroVironment is expected to under-perform the Textron. In addition to that, AeroVironment is 1.49 times more volatile than Textron. It trades about -0.2 of its total potential returns per unit of risk. Textron is currently generating about 0.1 per unit of volatility. If you would invest 8,206 in Textron on August 31, 2024 and sell it today you would earn a total of 302.00 from holding Textron or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AeroVironment vs. Textron
Performance |
| Timeline |
| AeroVironment |
| Textron |
AeroVironment and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AeroVironment and Textron
The main advantage of trading using opposite AeroVironment and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroVironment position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| AeroVironment vs. L3Harris Technologies | AeroVironment vs. Mercury Systems | AeroVironment vs. Textron | AeroVironment vs. HEICO |
| Textron vs. Hexcel | Textron vs. Huntington Ingalls Industries | Textron vs. Curtiss Wright | Textron vs. Mercury Systems |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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