Correlation Between E I and Howmet Aerospace
Can any of the company-specific risk be diversified away by investing in both E I and Howmet Aerospace 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 E I and Howmet Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E I du and Howmet Aerospace, you can compare the effects of market volatilities on E I and Howmet Aerospace 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 E I with a short position of Howmet Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of E I and Howmet Aerospace.
Diversification Opportunities for E I and Howmet Aerospace
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTA-PA and Howmet is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding E I du and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace and E I 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 E I du are associated (or correlated) with Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of E I i.e., E I and Howmet Aerospace go up and down completely randomly.
Pair Corralation between E I and Howmet Aerospace
Assuming the 90 days trading horizon E I is expected to generate 5.12 times less return on investment than Howmet Aerospace. But when comparing it to its historical volatility, E I du is 1.92 times less risky than Howmet Aerospace. It trades about 0.01 of its potential returns per unit of risk. Howmet Aerospace is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,550 in Howmet Aerospace on November 29, 2024 and sell it today you would earn a total of 1,309 from holding Howmet Aerospace or generate 23.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 67.38% |
| Values | Daily Returns |
E I du vs. Howmet Aerospace
Performance |
| Timeline |
| E I du |
| Howmet Aerospace |
E I and Howmet Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E I and Howmet Aerospace
The main advantage of trading using opposite E I and Howmet Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E I position performs unexpectedly, Howmet Aerospace 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 Howmet Aerospace will offset losses from the drop in Howmet Aerospace's long position.The idea behind E I du and Howmet Aerospace 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.| Howmet Aerospace vs. E I du | Howmet Aerospace vs. E I du | Howmet Aerospace vs. Bank of America | Howmet Aerospace vs. Compass Diversified |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Transaction History View history of all your transactions and understand their impact on performance |