Correlation Between Textron and Triumph

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

Diversification Opportunities for Textron and Triumph

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Textron and Triumph is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Triumph Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triumph 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 Triumph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triumph Group has no effect on the direction of Textron i.e., Textron and Triumph go up and down completely randomly.

Pair Corralation between Textron and Triumph

Considering the 90-day investment horizon Textron is expected to generate 0.68 times more return on investment than Triumph. However, Textron is 1.48 times less risky than Triumph. It trades about -0.04 of its potential returns per unit of risk. Triumph Group is currently generating about -0.16 per unit of risk. If you would invest  6,258  in Textron on March 26, 2022 and sell it today you would lose (196.00)  from holding Textron or give up 3.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Textron  vs.  Triumph Group

 Performance (%) 
      Timeline 
Textron 
Textron Performance
0 of 100
Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0014
Payout Ratio
0.0886
Last Split Factor
2:1
Forward Annual Dividend Rate
0.08
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-09
Last Split Date
2007-08-27

Textron Price Channel

Triumph Group 
Triumph Performance
0 of 100
Over the last 90 days Triumph Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0173
Last Split Factor
2:1
Forward Annual Dividend Rate
0.16
Dividend Date
2020-03-16
Ex Dividend Date
2020-02-28
Last Split Date
2011-07-15

Triumph Price Channel

Textron and Triumph Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Textron and Triumph

The main advantage of trading using opposite Textron and Triumph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron position performs unexpectedly, Triumph 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 Triumph will offset losses from the drop in Triumph's long position.
The idea behind Textron and Triumph Group 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.
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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