Correlation Between Alliant Techsystems and Raytheon Technologies

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Can any of the company-specific risk be diversified away by investing in both Alliant Techsystems and Raytheon Technologies 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 Alliant Techsystems and Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliant Techsystems and Raytheon Technologies, you can compare the effects of market volatilities on Alliant Techsystems and Raytheon Technologies 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 Alliant Techsystems with a short position of Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Techsystems and Raytheon Technologies.

Diversification Opportunities for Alliant Techsystems and Raytheon Technologies

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Alliant and Raytheon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Techsystems and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Alliant Techsystems 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 Alliant Techsystems are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Alliant Techsystems i.e., Alliant Techsystems and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Alliant Techsystems and Raytheon Technologies

If you would invest (100.00) in Raytheon Technologies on December 29, 2023 and sell it today you would earn a total of  100.00  from holding Raytheon Technologies or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alliant Techsystems  vs.  Raytheon Technologies

 Performance 
       Timeline  
Alliant Techsystems 

Risk-Adjusted Performance

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Over the last 90 days Alliant Techsystems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alliant Techsystems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Raytheon Technologies 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Raytheon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alliant Techsystems and Raytheon Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alliant Techsystems and Raytheon Technologies

The main advantage of trading using opposite Alliant Techsystems and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Techsystems position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.
The idea behind Alliant Techsystems and Raytheon Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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