Correlation Between Northrop Grumman and Snap On
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Snap On 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 Northrop Grumman and Snap On into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Snap On, you can compare the effects of market volatilities on Northrop Grumman and Snap On 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 Northrop Grumman with a short position of Snap On. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Snap On.
Diversification Opportunities for Northrop Grumman and Snap On
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Northrop and Snap is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On and Northrop Grumman 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 Northrop Grumman are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Snap On go up and down completely randomly.
Pair Corralation between Northrop Grumman and Snap On
Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.55 times more return on investment than Snap On. However, Northrop Grumman is 1.83 times less risky than Snap On. It trades about 0.05 of its potential returns per unit of risk. Snap On is currently generating about -0.14 per unit of risk. If you would invest 46,991 in Northrop Grumman on January 26, 2024 and sell it today you would earn a total of 466.00 from holding Northrop Grumman or generate 0.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Northrop Grumman vs. Snap On
Performance |
Timeline |
Northrop Grumman |
Snap On |
Northrop Grumman and Snap On Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northrop Grumman and Snap On
The main advantage of trading using opposite Northrop Grumman and Snap On positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Snap On 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 Snap On will offset losses from the drop in Snap On's long position.Northrop Grumman vs. Lockheed Martin | Northrop Grumman vs. General Dynamics | Northrop Grumman vs. Raytheon Technologies Corp | Northrop Grumman vs. Huntington Ingalls Industries |
Snap On vs. Lincoln Electric Holdings | Snap On vs. Timken Company | Snap On vs. RBC Bearings | Snap On vs. Kennametal |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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