Correlation Between Textron and Mercury Systems
Can any of the company-specific risk be diversified away by investing in both Textron and Mercury Systems 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 Mercury Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and Mercury Systems, you can compare the effects of market volatilities on Textron and Mercury Systems 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 Mercury Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and Mercury Systems.
Diversification Opportunities for Textron and Mercury Systems
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Textron and Mercury is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems 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 Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of Textron i.e., Textron and Mercury Systems go up and down completely randomly.
Pair Corralation between Textron and Mercury Systems
Considering the 90-day investment horizon Textron is expected to generate 6.86 times less return on investment than Mercury Systems. But when comparing it to its historical volatility, Textron is 3.02 times less risky than Mercury Systems. It trades about 0.08 of its potential returns per unit of risk. Mercury Systems is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,366 in Mercury Systems on August 28, 2024 and sell it today you would earn a total of 728.00 from holding Mercury Systems or generate 21.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Textron vs. Mercury Systems
Performance |
| Timeline |
| Textron |
| Mercury Systems |
Textron and Mercury Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and Mercury Systems
The main advantage of trading using opposite Textron and Mercury Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron position performs unexpectedly, Mercury Systems 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 Mercury Systems will offset losses from the drop in Mercury Systems' long position.| Textron vs. Hexcel | Textron vs. Huntington Ingalls Industries | Textron vs. Curtiss Wright | Textron vs. Mercury Systems |
| Mercury Systems vs. Curtiss Wright | Mercury Systems vs. Hexcel | Mercury Systems vs. Ducommun Incorporated | Mercury Systems vs. Woodward |
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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