Correlation Between Ammo and Textron
Can any of the company-specific risk be diversified away by investing in both Ammo and Textron 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 Ammo and Textron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ammo Inc and Textron, you can compare the effects of market volatilities on Ammo and Textron 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 Ammo with a short position of Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ammo and Textron.
Diversification Opportunities for Ammo and Textron
Poor diversification
The 3 months correlation between Ammo and Textron is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ammo Inc and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron and Ammo 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 Ammo Inc are associated (or correlated) with Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Ammo i.e., Ammo and Textron go up and down completely randomly.
Pair Corralation between Ammo and Textron
Given the investment horizon of 90 days Ammo Inc is expected to generate 2.76 times more return on investment than Textron. However, Ammo is 2.76 times more volatile than Textron. It trades about 0.1 of its potential returns per unit of risk. Textron is currently generating about 0.1 per unit of risk. If you would invest 112.00 in Ammo Inc on August 31, 2024 and sell it today you would earn a total of 10.00 from holding Ammo Inc or generate 8.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ammo Inc vs. Textron
Performance |
| Timeline |
| Ammo Inc |
| Textron |
Ammo and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ammo and Textron
The main advantage of trading using opposite Ammo and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ammo position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| Ammo vs. Sturm Ruger | Ammo vs. Kratos Defense Security | Ammo vs. VSE Corporation | Ammo vs. Smith Wesson Brands |
| Textron vs. Hexcel | Textron vs. Huntington Ingalls Industries | Textron vs. Curtiss Wright | Textron vs. Mercury Systems |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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