Correlation Between HEICO and Leonardo SpA
Can any of the company-specific risk be diversified away by investing in both HEICO and Leonardo SpA 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 Leonardo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HEICO and Leonardo SpA ADR, you can compare the effects of market volatilities on HEICO and Leonardo SpA 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 Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEICO and Leonardo SpA.
Diversification Opportunities for HEICO and Leonardo SpA
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HEICO and Leonardo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR 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 Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of HEICO i.e., HEICO and Leonardo SpA go up and down completely randomly.
Pair Corralation between HEICO and Leonardo SpA
Assuming the 90 days horizon HEICO is expected to generate 2.21 times less return on investment than Leonardo SpA. But when comparing it to its historical volatility, HEICO is 1.21 times less risky than Leonardo SpA. It trades about 0.2 of its potential returns per unit of risk. Leonardo SpA ADR is currently generating about 0.36 of returns per unit of risk over similar time horizon. 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 Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HEICO vs. Leonardo SpA ADR
Performance |
| Timeline |
| HEICO |
| Leonardo SpA ADR |
HEICO and Leonardo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HEICO and Leonardo SpA
The main advantage of trading using opposite HEICO and Leonardo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEICO position performs unexpectedly, Leonardo SpA 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 Leonardo SpA will offset losses from the drop in Leonardo SpA's long position.| HEICO vs. Vertical Aerospace | HEICO vs. Rolls Royce Holdings plc | HEICO vs. Embraer SA ADR | HEICO vs. Rocket Lab USA |
| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
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 Stocks Directory module to find actively traded stocks across global markets.
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