Correlation Between Textron and Hexcel
Can any of the company-specific risk be diversified away by investing in both Textron and Hexcel 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 Hexcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and Hexcel, you can compare the effects of market volatilities on Textron and Hexcel 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 Hexcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and Hexcel.
Diversification Opportunities for Textron and Hexcel
Very weak diversification
The 3 months correlation between Textron and Hexcel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel 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 Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of Textron i.e., Textron and Hexcel go up and down completely randomly.
Pair Corralation between Textron and Hexcel
Considering the 90-day investment horizon Textron is expected to generate 0.89 times more return on investment than Hexcel. However, Textron is 1.13 times less risky than Hexcel. It trades about 0.06 of its potential returns per unit of risk. Hexcel is currently generating about -0.02 per unit of risk. If you would invest 6,320 in Textron on August 27, 2024 and sell it today you would earn a total of 2,218 from holding Textron or generate 35.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Textron vs. Hexcel
Performance |
| Timeline |
| Textron |
| Hexcel |
Textron and Hexcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and Hexcel
The main advantage of trading using opposite Textron and Hexcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron position performs unexpectedly, Hexcel 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 Hexcel will offset losses from the drop in Hexcel's long position.| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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