Correlation Between BANK HANDLOWY and Northrop Grumman

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

By analyzing existing cross correlation between BANK HANDLOWY and Northrop Grumman, you can compare the effects of market volatilities on BANK HANDLOWY and Northrop Grumman 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 BANK HANDLOWY with a short position of Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK HANDLOWY and Northrop Grumman.

Diversification Opportunities for BANK HANDLOWY and Northrop Grumman

0.04

Correlation Coefficient

BANK HANDLOWY  Northrop Grumman

Significant diversification

The 3 months correlation between BANK and Northrop is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BANK HANDLOWY and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman and BANK HANDLOWY 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 BANK HANDLOWY are associated (or correlated) with Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of BANK HANDLOWY i.e., BANK HANDLOWY and Northrop Grumman go up and down completely randomly.

Pair Corralation between BANK HANDLOWY and Northrop Grumman

Assuming the 90 days trading horizon BANK HANDLOWY is expected to generate 3.96 times less return on investment than Northrop Grumman. But when comparing it to its historical volatility, BANK HANDLOWY is 1.74 times less risky than Northrop Grumman. It trades about 0.07 of its potential returns per unit of risk. Northrop Grumman is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  40,814  in Northrop Grumman on April 25, 2025 and sell it today you would earn a total of  6,796  from holding Northrop Grumman or generate 16.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BANK HANDLOWY  vs.  Northrop Grumman

BANK HANDLOWY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BANK HANDLOWY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BANK HANDLOWY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Northrop Grumman

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northrop Grumman are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northrop Grumman reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK HANDLOWY and Northrop Grumman

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

The idea behind BANK HANDLOWY and Northrop Grumman 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.