Correlation Between Heico and Momentus
Can any of the company-specific risk be diversified away by investing in both Heico and Momentus 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 Momentus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heico and Momentus, you can compare the effects of market volatilities on Heico and Momentus 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 Momentus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heico and Momentus.
Diversification Opportunities for Heico and Momentus
Very good diversification
The 3 months correlation between Heico and Momentus is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Momentus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentus 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 Momentus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Momentus has no effect on the direction of Heico i.e., Heico and Momentus go up and down completely randomly.
Pair Corralation between Heico and Momentus
Considering the 90-day investment horizon Heico is expected to generate 2.54 times less return on investment than Momentus. But when comparing it to its historical volatility, Heico is 4.13 times less risky than Momentus. It trades about 0.29 of its potential returns per unit of risk. Momentus is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Momentus on August 28, 2024 and sell it today you would earn a total of 12.00 from holding Momentus or generate 25.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heico vs. Momentus
Performance |
| Timeline |
| Heico |
| Momentus |
Heico and Momentus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heico and Momentus
The main advantage of trading using opposite Heico and Momentus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heico position performs unexpectedly, Momentus 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 Momentus will offset losses from the drop in Momentus' long position.The idea behind Heico and Momentus 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.| Momentus vs. Planet Labs PBC | Momentus vs. Rocket Lab USA | Momentus vs. Redwire Corp | Momentus vs. Virgin Galactic Holdings |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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