Correlation Between Textron and Spirit Aerosystems

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

By analyzing existing cross correlation between Textron and Spirit Aerosystems Holdings, you can compare the effects of market volatilities on Textron and Spirit Aerosystems 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 Spirit Aerosystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and Spirit Aerosystems.

Diversification Opportunities for Textron and Spirit Aerosystems

0.84

Correlation Coefficient

Textron  Spirit Aerosystems

Very poor diversification

The 3 months correlation between Textron and Spirit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Spirit Aerosystems Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Aerosystems 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 Spirit Aerosystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Aerosystems has no effect on the direction of Textron i.e., Textron and Spirit Aerosystems go up and down completely randomly.

Pair Corralation between Textron and Spirit Aerosystems

Considering the 90-day investment horizon Textron is expected to generate 1.09 times less return on investment than Spirit Aerosystems. In addition to that, Textron is 1.43 times more volatile than Spirit Aerosystems Holdings. It trades about 0.09 of its total potential returns per unit of risk. Spirit Aerosystems Holdings is currently generating about 0.15 per unit of volatility. If you would invest  3,595  in Spirit Aerosystems Holdings on May 2, 2025 and sell it today you would earn a total of  387.00  from holding Spirit Aerosystems Holdings or generate 10.76% return on investment over 90 days.

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

Textron  vs.  Spirit Aerosystems Holdings

Textron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Textron are ranked lower than 7 (%) 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 August 2025.

Spirit Aerosystems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spirit Aerosystems Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Spirit Aerosystems may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Textron and Spirit Aerosystems

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

The idea behind Textron and Spirit Aerosystems 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.