Correlation Between Heico and Lilium NV
Can any of the company-specific risk be diversified away by investing in both Heico and Lilium NV 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 Lilium NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heico and Lilium NV, you can compare the effects of market volatilities on Heico and Lilium NV 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 Lilium NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heico and Lilium NV.
Diversification Opportunities for Heico and Lilium NV
Good diversification
The 3 months correlation between Heico and Lilium is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Lilium NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lilium NV 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 Lilium NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lilium NV has no effect on the direction of Heico i.e., Heico and Lilium NV go up and down completely randomly.
Pair Corralation between Heico and Lilium NV
Considering the 90-day investment horizon Heico is expected to generate 3.98 times less return on investment than Lilium NV. But when comparing it to its historical volatility, Heico is 18.23 times less risky than Lilium NV. It trades about 0.29 of its potential returns per unit of risk. Lilium NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Lilium NV on August 28, 2024 and sell it today you would lose (4.60) from holding Lilium NV or give up 32.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Heico vs. Lilium NV
Performance |
| Timeline |
| Heico |
| Lilium NV |
Heico and Lilium NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heico and Lilium NV
The main advantage of trading using opposite Heico and Lilium NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heico position performs unexpectedly, Lilium NV 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 Lilium NV will offset losses from the drop in Lilium NV's long position.The idea behind Heico and Lilium NV 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.| Lilium NV vs. Vertical Aerospace | Lilium NV vs. Ehang Holdings | Lilium NV vs. Rocket Lab USA | Lilium NV vs. Archer Aviation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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