Correlation Between Textron and AeroVironment
Can any of the company-specific risk be diversified away by investing in both Textron and AeroVironment 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 Textron and AeroVironment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and AeroVironment, you can compare the effects of market volatilities on Textron and AeroVironment 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 Textron with a short position of AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and AeroVironment.
Diversification Opportunities for Textron and AeroVironment
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Textron and AeroVironment is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Textron and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and Textron 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 Textron are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Textron i.e., Textron and AeroVironment go up and down completely randomly.
Pair Corralation between Textron and AeroVironment
Considering the 90-day investment horizon Textron is expected to generate 0.31 times more return on investment than AeroVironment. However, Textron is 3.27 times less risky than AeroVironment. It trades about -0.17 of its potential returns per unit of risk. AeroVironment is currently generating about -0.09 per unit of risk. If you would invest 8,536 in Textron on October 23, 2024 and sell it today you would lose (620.00) from holding Textron or give up 7.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Textron vs. AeroVironment
Performance |
| Timeline |
| Textron |
| AeroVironment |
Textron and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and AeroVironment
The main advantage of trading using opposite Textron and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.| Textron vs. Hexcel | Textron vs. Huntington Ingalls Industries | Textron vs. Curtiss Wright | Textron vs. Mercury Systems |
| AeroVironment vs. L3Harris Technologies | AeroVironment vs. Mercury Systems | AeroVironment vs. Textron | AeroVironment vs. HEICO |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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