Correlation Between Raytheon Technologies and Marvell Technology
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies and Marvell Technology 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 Raytheon Technologies and Marvell Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies and Marvell Technology, you can compare the effects of market volatilities on Raytheon Technologies and Marvell Technology 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 Raytheon Technologies with a short position of Marvell Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Marvell Technology.
Diversification Opportunities for Raytheon Technologies and Marvell Technology
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Raytheon and Marvell is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and Marvell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology and Raytheon Technologies 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 Raytheon Technologies are associated (or correlated) with Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Marvell Technology go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Marvell Technology
Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 0.4 times more return on investment than Marvell Technology. However, Raytheon Technologies is 2.48 times less risky than Marvell Technology. It trades about 0.07 of its potential returns per unit of risk. Marvell Technology is currently generating about -0.5 per unit of risk. If you would invest 12,286 in Raytheon Technologies on December 11, 2024 and sell it today you would earn a total of 266.00 from holding Raytheon Technologies or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Raytheon Technologies vs. Marvell Technology
Performance |
| Timeline |
| Raytheon Technologies |
| Marvell Technology |
Raytheon Technologies and Marvell Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Marvell Technology
The main advantage of trading using opposite Raytheon Technologies and Marvell Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies position performs unexpectedly, Marvell Technology 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 Marvell Technology will offset losses from the drop in Marvell Technology's long position.The idea behind Raytheon Technologies and Marvell Technology 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.
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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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