Correlation Between Howmet Aerospace and Textron

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

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

Diversification Opportunities for Howmet Aerospace and Textron

0.8

Correlation Coefficient

Howmet Aerospace  Textron

Very poor diversification

The 3 months correlation between Howmet and Textron is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Howmet Aerospace and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron and Howmet Aerospace 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 Howmet Aerospace are associated (or correlated) with Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Howmet Aerospace i.e., Howmet Aerospace and Textron go up and down completely randomly.

Pair Corralation between Howmet Aerospace and Textron

Considering the 90-day investment horizon Howmet Aerospace is expected to generate 1.02 times more return on investment than Textron. However, Howmet Aerospace is 1.02 times more volatile than Textron. It trades about 0.17 of its potential returns per unit of risk. Textron is currently generating about 0.11 per unit of risk. If you would invest  15,570  in Howmet Aerospace on May 6, 2025 and sell it today you would earn a total of  2,856  from holding Howmet Aerospace or generate 18.34% return on investment over 90 days.

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

Howmet Aerospace  vs.  Textron

Howmet Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Howmet Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Textron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Textron are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Textron may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Howmet Aerospace and Textron

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

The idea behind Howmet Aerospace and Textron 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.