Correlation Between Howmet Aerospace and Mercury Systems
Can any of the company-specific risk be diversified away by investing in both Howmet Aerospace and Mercury 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 Howmet Aerospace and Mercury Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Howmet Aerospace and Mercury Systems, you can compare the effects of market volatilities on Howmet Aerospace and Mercury 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 Howmet Aerospace with a short position of Mercury Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Howmet Aerospace and Mercury Systems.
Diversification Opportunities for Howmet Aerospace and Mercury Systems
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Howmet and Mercury is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and Howmet Aerospace 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 Howmet Aerospace are associated (or correlated) with Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and Mercury Systems go up and down completely randomly.
Pair Corralation between Howmet Aerospace and Mercury Systems
Considering the 90-day investment horizon Howmet Aerospace is expected to generate 0.92 times more return on investment than Mercury Systems. However, Howmet Aerospace is 1.09 times less risky than Mercury Systems. It trades about 0.42 of its potential returns per unit of risk. Mercury Systems is currently generating about 0.25 per unit of risk. If you would invest 11,083 in Howmet Aerospace on October 21, 2024 and sell it today you would earn a total of 1,447 from holding Howmet Aerospace or generate 13.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Howmet Aerospace vs. Mercury Systems
Performance |
| Timeline |
| Howmet Aerospace |
| Mercury Systems |
Howmet Aerospace and Mercury Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Howmet Aerospace and Mercury Systems
The main advantage of trading using opposite Howmet Aerospace and Mercury Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Howmet Aerospace position performs unexpectedly, Mercury 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 Mercury Systems will offset losses from the drop in Mercury Systems' long position.| Howmet Aerospace vs. Curtiss Wright | Howmet Aerospace vs. Mercury Systems | Howmet Aerospace vs. AAR Corp | Howmet Aerospace vs. Ducommun Incorporated |
| Mercury Systems vs. Curtiss Wright | Mercury Systems vs. Hexcel | Mercury Systems vs. Ducommun Incorporated | Mercury Systems vs. Woodward |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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