Correlation Between Heico and Virgin Galactic

Can any of the company-specific risk be diversified away by investing in both Heico and Virgin Galactic 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 Heico and Virgin Galactic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heico and Virgin Galactic Holdings, you can compare the effects of market volatilities on Heico and Virgin Galactic 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 Heico with a short position of Virgin Galactic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heico and Virgin Galactic.

Diversification Opportunities for Heico and Virgin Galactic

-0.32

Correlation Coefficient

Heico  Virgin Galactic

Very good diversification

The 3 months correlation between Heico and Virgin is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Virgin Galactic Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Galactic Holdings and Heico 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 Heico are associated (or correlated) with Virgin Galactic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Galactic Holdings has no effect on the direction of Heico i.e., Heico and Virgin Galactic go up and down completely randomly.

Pair Corralation between Heico and Virgin Galactic

Considering the 90-day investment horizon Heico is expected to generate 0.24 times more return on investment than Virgin Galactic. However, Heico is 4.15 times less risky than Virgin Galactic. It trades about 0.08 of its potential returns per unit of risk. Virgin Galactic Holdings is currently generating about -0.06 per unit of risk. If you would invest  15,135  in Heico on July 12, 2024 and sell it today you would earn a total of  11,007  from holding Heico or generate 72.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Heico  vs.  Virgin Galactic Holdings

Heico

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heico are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Heico demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Virgin Galactic Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virgin Galactic Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Heico and Virgin Galactic

The main advantage of trading using opposite Heico and Virgin Galactic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heico position performs unexpectedly, Virgin Galactic 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 Virgin Galactic will offset losses from the drop in Virgin Galactic's long position.

The idea behind Heico and Virgin Galactic Holdings 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.