Correlation Between HEICO and BAE Systems
Can any of the company-specific risk be diversified away by investing in both HEICO and BAE Systems 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 HEICO and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HEICO and BAE Systems PLC, you can compare the effects of market volatilities on HEICO and BAE Systems 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 HEICO with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEICO and BAE Systems.
Diversification Opportunities for HEICO and BAE Systems
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between HEICO and BAE is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and BAE Systems PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems PLC and HEICO 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 HEICO are associated (or correlated) with BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems PLC has no effect on the direction of HEICO i.e., HEICO and BAE Systems go up and down completely randomly.
Pair Corralation between HEICO and BAE Systems
Assuming the 90 days horizon HEICO is expected to generate 0.5 times more return on investment than BAE Systems. However, HEICO is 2.02 times less risky than BAE Systems. It trades about 0.29 of its potential returns per unit of risk. BAE Systems PLC is currently generating about -0.04 per unit of risk. If you would invest 19,201 in HEICO on September 1, 2024 and sell it today you would earn a total of 1,912 from holding HEICO or generate 9.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HEICO vs. BAE Systems PLC
Performance |
| Timeline |
| HEICO |
| BAE Systems PLC |
HEICO and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HEICO and BAE Systems
The main advantage of trading using opposite HEICO and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEICO position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.| HEICO vs. Vertical Aerospace | HEICO vs. Rolls Royce Holdings plc | HEICO vs. Embraer SA ADR | HEICO vs. Rocket Lab USA |
| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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