Correlation Between Woodward and HEICO
Can any of the company-specific risk be diversified away by investing in both Woodward and HEICO 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 Woodward and HEICO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woodward and HEICO, you can compare the effects of market volatilities on Woodward and HEICO 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 Woodward with a short position of HEICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodward and HEICO.
Diversification Opportunities for Woodward and HEICO
Poor diversification
The 3 months correlation between Woodward and HEICO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Woodward and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO and Woodward 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 Woodward are associated (or correlated) with HEICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEICO has no effect on the direction of Woodward i.e., Woodward and HEICO go up and down completely randomly.
Pair Corralation between Woodward and HEICO
Considering the 90-day investment horizon Woodward is expected to generate 1.32 times more return on investment than HEICO. However, Woodward is 1.32 times more volatile than HEICO. It trades about 0.07 of its potential returns per unit of risk. HEICO is currently generating about 0.09 per unit of risk. If you would invest 10,080 in Woodward on August 28, 2024 and sell it today you would earn a total of 7,849 from holding Woodward or generate 77.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woodward vs. HEICO
Performance |
| Timeline |
| Woodward |
| HEICO |
Woodward and HEICO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woodward and HEICO
The main advantage of trading using opposite Woodward and HEICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodward position performs unexpectedly, HEICO 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 HEICO will offset losses from the drop in HEICO's long position.| Woodward vs. Hexcel | Woodward vs. Ducommun Incorporated | Woodward vs. Mercury Systems | Woodward vs. AAR Corp |
| HEICO vs. Vertical Aerospace | HEICO vs. Rolls Royce Holdings plc | HEICO vs. Embraer SA ADR | HEICO vs. Rocket Lab USA |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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