Correlation Between Transdigm Group and Leonardo SpA
Can any of the company-specific risk be diversified away by investing in both Transdigm Group and Leonardo SpA 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 Transdigm Group and Leonardo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transdigm Group Incorporated and Leonardo SpA ADR, you can compare the effects of market volatilities on Transdigm Group and Leonardo SpA 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 Transdigm Group with a short position of Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and Leonardo SpA.
Diversification Opportunities for Transdigm Group and Leonardo SpA
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transdigm and Leonardo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR and Transdigm Group 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 Transdigm Group Incorporated are associated (or correlated) with Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of Transdigm Group i.e., Transdigm Group and Leonardo SpA go up and down completely randomly.
Pair Corralation between Transdigm Group and Leonardo SpA
Considering the 90-day investment horizon Transdigm Group Incorporated is expected to under-perform the Leonardo SpA. In addition to that, Transdigm Group is 1.22 times more volatile than Leonardo SpA ADR. It trades about -0.07 of its total potential returns per unit of risk. Leonardo SpA ADR is currently generating about 0.36 per unit of volatility. If you would invest 1,177 in Leonardo SpA ADR on September 5, 2024 and sell it today you would earn a total of 187.00 from holding Leonardo SpA ADR or generate 15.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transdigm Group Incorporated vs. Leonardo SpA ADR
Performance |
| Timeline |
| Transdigm Group |
| Leonardo SpA ADR |
Transdigm Group and Leonardo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transdigm Group and Leonardo SpA
The main advantage of trading using opposite Transdigm Group and Leonardo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group position performs unexpectedly, Leonardo SpA 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 Leonardo SpA will offset losses from the drop in Leonardo SpA's long position.| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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