Correlation Between Leonardo SpA and Transdigm Group
Can any of the company-specific risk be diversified away by investing in both Leonardo SpA and Transdigm Group 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 Leonardo SpA and Transdigm Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leonardo SpA ADR and Transdigm Group Incorporated, you can compare the effects of market volatilities on Leonardo SpA and Transdigm Group 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 Leonardo SpA with a short position of Transdigm Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo SpA and Transdigm Group.
Diversification Opportunities for Leonardo SpA and Transdigm Group
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leonardo and Transdigm is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo SpA ADR and Transdigm Group Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transdigm Group and Leonardo SpA 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 Leonardo SpA ADR are associated (or correlated) with Transdigm Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transdigm Group has no effect on the direction of Leonardo SpA i.e., Leonardo SpA and Transdigm Group go up and down completely randomly.
Pair Corralation between Leonardo SpA and Transdigm Group
Assuming the 90 days horizon Leonardo SpA ADR is expected to generate 0.82 times more return on investment than Transdigm Group. However, Leonardo SpA ADR is 1.22 times less risky than Transdigm Group. It trades about 0.36 of its potential returns per unit of risk. Transdigm Group Incorporated is currently generating about -0.07 per unit of risk. If you would invest 1,177 in Leonardo SpA ADR on September 5, 2024 and sell it today you would earn a total of 187.00 from holding Leonardo SpA ADR or generate 15.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leonardo SpA ADR vs. Transdigm Group Incorporated
Performance |
| Timeline |
| Leonardo SpA ADR |
| Transdigm Group |
Leonardo SpA and Transdigm Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leonardo SpA and Transdigm Group
The main advantage of trading using opposite Leonardo SpA and Transdigm Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leonardo SpA position performs unexpectedly, Transdigm Group 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 Transdigm Group will offset losses from the drop in Transdigm Group's long position.| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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