Correlation Between Textron and Transdigm Group

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

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

Diversification Opportunities for Textron and Transdigm Group

0.63

Correlation Coefficient

Textron  Transdigm Group

Poor diversification

The 3 months correlation between Textron and Transdigm is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Transdigm Group Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transdigm Group 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 Transdigm Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transdigm Group has no effect on the direction of Textron i.e., Textron and Transdigm Group go up and down completely randomly.

Pair Corralation between Textron and Transdigm Group

Considering the 90-day investment horizon Textron is expected to generate 0.81 times more return on investment than Transdigm Group. However, Textron is 1.23 times less risky than Transdigm Group. It trades about 0.05 of its potential returns per unit of risk. Transdigm Group Incorporated is currently generating about -0.02 per unit of risk. If you would invest  7,603  in Textron on May 20, 2025 and sell it today you would earn a total of  286.00  from holding Textron or generate 3.76% return on investment over 90 days.

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

Textron  vs.  Transdigm Group Incorporated

Textron

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Textron are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Textron is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Transdigm Group

Risk-Adjusted Performance

Weakest

Over the last 90 days Transdigm Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Transdigm Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Textron and Transdigm Group

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

The idea behind Textron and Transdigm Group Incorporated 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.