Correlation Between V2X and Hexcel
Can any of the company-specific risk be diversified away by investing in both V2X 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 V2X and Hexcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between V2X Inc and Hexcel, you can compare the effects of market volatilities on V2X 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 V2X with a short position of Hexcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and Hexcel.
Diversification Opportunities for V2X and Hexcel
Significant diversification
The 3 months correlation between V2X and Hexcel is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel and V2X 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 V2X Inc 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 V2X i.e., V2X and Hexcel go up and down completely randomly.
Pair Corralation between V2X and Hexcel
Considering the 90-day investment horizon V2X Inc is expected to generate 2.11 times more return on investment than Hexcel. However, V2X is 2.11 times more volatile than Hexcel. It trades about -0.01 of its potential returns per unit of risk. Hexcel is currently generating about -0.19 per unit of risk. If you would invest 6,273 in V2X Inc on August 23, 2024 and sell it today you would lose (157.00) from holding V2X Inc or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
V2X Inc vs. Hexcel
Performance |
| Timeline |
| V2X Inc |
| Hexcel |
V2X and Hexcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with V2X and Hexcel
The main advantage of trading using opposite V2X and Hexcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X 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.The idea behind V2X Inc and Hexcel 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.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 CEOs Directory module to screen CEOs from public companies around the world.
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